UPDATED 20:20 EDT / FEBRUARY 18 2020

INFRA

Report: Smartphone manufacturing, 5G and fiber optics hit hard by coronavirus

Parts of the tech industry are likely to face disruption from the spread of COVID-2019 coronavirus in China, but some sectors will be harder-hit than others.

That’s according to a new report released Monday by technology industry research firm TrendForce. It found that smartphone manufacturing is likely to take a big hit from the ongoing spread of the virus as its supply chain is highly labor-intensive.

Labor is an ongoing theme in the report as industries with high levels of automation are those that suffer the least. The report claims that smartphone production will likely decline 12% year-on-year in the first quarter, delivering the lowest output of the past five years.

Upstream supply chain issues including passive components and camera modules are also said to be showing shortages that could potentially continue to affect smartphone production into the second quarter if the virus isn’t contained by the end of February.

Wearables will also take a hit, with supply shortages, labor shortages and work stoppages all taking their toll. The report was somewhat optimistic, however, adding that major wearables releases such as a the Apple Watch generally occur in the second half of the year. Presuming the outbreak is contained by the second quarter, there should be a negligible effect on wearables shipments.

The rollout of 5G technology and fiber optics is likely to be impacted with significant companies in the sector based in Wuhan, the epicenter of the virus outbreak. A full 25% of the world’s fiber optics supply is based in Wuhan, meaning that there will be significant shortages that may slow the rollout of 5G networks.

The production of memory and semiconductors is one of the few sectors that won’t be hurt that much, since most of the industry relies on automation. A recent slump in demand for both as China’s economy grinds to a halt will also ease the potential damage.

The report follows Apple Inc. revising its quarterly guidance on Monday in light of supply issues from mainland China. The company said that its worldwide iPhone supply would be “temporarily restrained” and that although its facilities outside Hubei province had reopened, they’re “ramping up more slowly than we had anticipated.” Apple also added that demand for its products within China has been affected by the virus as well.

One winner from Apple’s woes could be rival Samsung Electronics Co. Ltd. Reuters reported that the company manufactures around half of its phones in Vietnam and hence isn’t as affected by the virus. Samsung also has a much lower exposure to the China retail market than Apple.

Photo: China News Service/Wikimedia Commons

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