Partly thanks to drastic measures, China appears to have conquered the coronavirus. The number of new infections has fallen sharply in recent days. Chinese authorities expect that no contamination will be reported by mid-March. The heavily damaged tech factories are slowly starting up again.
With a ban on consuming wild animals, China wants to prevent a recurrence of the virus outbreak. However, the country will have to recover for a long time from the economic damage suffered. Experts believe that China will report negative economic growth this year. That would be the first time since the end of the Cultural Revolution.
Apple supplier Foxconn reports that its sales in February fell to $ 7.2 billion, the lowest level since March 2013.
Production will not return to normal until the end of March, at the moment about fifty per cent of the capacity of the Foxconn factories is available. That is also the picture at other factories. Apple in particular, with 200 Chinese suppliers, is still suffering from shortages. The production of the cheap iPhone 9, which has yet to be announced, appears to have been delayed. Allegedly there is a shortage of replacement iPhones at the American Apple Stores.
After China, neighbouring South Korea, where 6,000 infections were reported in a short time, has the biggest problems. LG and Samsung factories closed temporarily after being infected. However, both companies are also experiencing problems with the supply of parts from China. Western companies, in turn, depend on memory components and screens from South Korea.
The dependence on China will certainly be included in the evaluations of tech companies, which will want to spread their production more. Vietnam will certainly benefit from this. Mexico is also increasingly in the picture. Yet it will take years before there is sufficient production capacity outside of China. Nonetheless, business magazine Forbes suggested earlier this week that China’s role as the “factory of the world” might have ended.
Relatively little hardware is made in Europe so that only the retail sector is still suffering from shortages. The (online) travel sector is only really hit hard: the international trade association IATA estimates the loss for European airline companies this year at almost € 39 billion. The British company Flybe, which was not really in good health, had to apply for a moratorium.