Coronavirus may ravage technology supply chains
Companies with 'significant exposure to China' at risk
The debt-ratings agency Fitch warned Tuesday that U.S. technology firms could suffer lasting harm from the coronavirus outbreak.
The firms are among scores of companies to shutter factories and stores or drastically reduce operations amid widespread infections with the virus, which originated in Wuhan, China, and has led to more than 60 million people being locked down. At least 72,436 people in the country have been sickened while more than 1,800 have died, and businesses from amusement parks to casinos, airlines and luxury retailers have taken hits.
Apple, the maker of iPhones and iPads, warned Monday that it wouldn't meet quarterly sales projections.
“The coronavirus (COVID-19) outbreak may have a lingering effect on technology companies, given Chinese-centric supply chains, meaningful Chinese revenue exposure, uncertainty regarding when the virus will peak, Chinese suppliers that are still not operating at full capacity, and the inability to quickly change suppliers,” wrote Alen Lin and Carla Norfleet Taylor, Chicago-based senior directors at Fitch Ratings.
APPLE SHARES SWOON AFTER CORONAVIRUS WARNING
Hardware companies are more likely to be impacted by the situation in China than software companies due to the “lengthy complex supply chains involving semiconductors and other components produced across various regions in Asia," they said.
Specifically, Fitch points to Texas Instruments, Western Digital, Jabil, Intel, HP and Dell as companies with “significant exposure to China.”
|WDC||WESTERN DIGITAL CORP.||39.00||-1.24||-3.08%|
|HP||HELMERICH & PAYNE INC.||32.71||-0.80||-2.39%|
|DELL||DELL TECHNOLOGIES INC.||45.48||-1.79||-3.79%|
The coronavirus-related supply-chain issues come at an inopportune time for the companies, which may already have been hurt by trade policy uncertainty and the U.S. crackdown on the Chinese telecom provider Huawei.
Foxconn, which produces about half of China’s smartphone exports, including the iPhone, has reportedly restarted 10 percent of its operations. The company pushed back against reports that it would be operating at 50 percent capacity by the end of February.
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“If Chinese manufacturing activities normalize in the next one to two weeks, the effect will be transitory; but if the situation drags into March and April, the effect could be more disruptive for the sector,” Fitch’s senior directors wrote.