| Hey y'all, it's Austin. After weeks of uncertainty, Foxconn, the world's largest electronics contract manufacturer, said it's getting its mainland China factories back on track, following massive disruptions due to the coronavirus pandemic. But reviving the supply chain and production lines that Apple Inc. relies on to assemble the majority of the globe's iPhones is only half the challenge. The other half is getting people to buy them. "In the U.S., what we are worried about is the market," Terry Gou, founder of Foxconn, also known as Hon Hai Precision Industry Co., told reporters in Taipei last week. It's easy to imagine a scenario in which "production was resumed quickly but consumers stop spending," he said. While consumers scramble to panic-purchase household goods ranging from hand sanitizer to toilet paper, it maybe not be the prime moment to also purchase a new iPhone 11 or an Amazon Echo. That's particularly true as the stock market tumbles. Research firm IDC is anticipating sharp declines of PC and tablet shipments, while the global smartphone market is expected to contract an alarming 10.6% in the first half of 2020. So when will tech consumer spending get back to normalcy? China offers a preview of what the coming bust and recovery might look like. In the early stages of the pandemic, as coronavirus emanated from Wuhan, China ramped up its quarantine efforts, causing a dramatic drop in factory output, foot traffic and consumer spending. Car sales in China plummeted 92% in the first half of February. Homegrown hardware-makers such as Lenovo, Huawei, and Xiaomi faced a supply crunch and saw huge sales slumps. Apple even shut down all 42 of its retail stores in China due to the outbreak. A report last week indicated the company shipped just 494,000 phones in the country in February, down from the 1.27 million Apple shipped during that same period last year. Now, as the virus lockdown recedes, things are slowly improving. Apple has reopened all of its stores in China as of Friday. Customers appear to be buying up luxury goods again, a result of what analysts have described as pent-up Chinese consumer demand. And even though brick-and-mortar stores took a beating, some e-commerce companies are expecting decent sales. JD.com Inc., the Chinese e-commerce behemoth, reported this month that it's anticipating 10% revenue growth this quarter. IDC analyst Will Wong has suggested that such internet purchasing could make up at least partially for declines in device sales in China. "Buyers will purchase from online channels, which will account for a significantly increased share of phones sold in the first half of 2020," he wrote in a late February research note. "[That] may represent a permanent shift in buying behaviors." In the rest of the world, despite all the hand-wringing about global supply chains, it's now consumer demand that could harm factories (instead of vice versa). Dr. Yossi Sheffi, director of MIT's supply chain management program, has called this the "bullwhip effect," whereby a lack of customer appetite leads to corporations and retailers cutting orders from suppliers and manufacturers. In this fraught climate, tech companies will have to get creative about how to maintain hardware sales. That could mean prioritizing products that are geared for organizations—offices, school systems, etc.—which are rapidly moving toward short-term remote operations. Dell Technologies Inc. CEO Michael Dell, in an interview published March 13 with trade-publication CRN, said he's seen a big jump in "the demand for work-from-home solutions." His focus is on addressing those demand shortages, Dell said, adding, "Our supply chain is in relatively good shape." —Austin Carr | 
Post a Comment