Coronavirus Impacts Electronics and Automobile Sectors

• China’s factory and transport shutdown are seriously impacting global supply chains.
• Forwarders are grappling with resulting cashflow constraints.
• Coronavirus fallout has the biggest impact on the consumer electronics and automobile industries.
• Shipments of smartwatches to fall by 16%, smart speakers and notebooks by 12% and smartphones by 10%.
• In India, freight forwarders are bearing the brunt of the country’s reliance on China.

According to an article published in The Loadstar, China’s extended factory and transport shutdown are still seriously impacting global supply chains, with forwarders grappling with resulting cashflow constraints.

Electronic and automobile industry bear the brunt

According to Taiwan-based market intelligence firm TrendForce, the coronavirus fallout has had the biggest impact on the consumer electronics and automobile industries.

TrendForce said, “The outbreak has made a relatively high impact on the smartphone industry because its supply chain is highly labor-intensive. Parts in the upstream supply chain, including passive components and camera modules, are also showing shortages, which can potentially continue to negatively affect smartphone production in Q2 if the outbreak is not contained by the end of February.”

Businesses closed and monitored

The smart speaker industry is a similar bind, with assembly facilities spread throughout Chongqing, Jiangzhe, Beijing, Shanghai, and Guangdong – “All of which are currently under closed-off management, with personnel entering and leaving the areas strictly monitored,” TrendForce explained.

During the first quarter, the firm forecasts shipments of smartwatches to fall by 16%, smart speakers and notebooks by 12% and smartphones by 10%.

In the automobile market, which relies heavily on air cargo for just-in-time supply chains, TrendForce noted the quarantines and extended factory closures caused material and component shortages for overseas manufacturers, indicating a 14% decline in the global auto market in the first quarter.

“Although automakers can compensate for material shortage through overseas factories, the process of capacity expansion and shipping of goods is still expected to create gaps in the overall manufacturing process,” it said.

Customers complaining

One Frankfurt-based forwarder told, “More and more of our customers are complaining that they are not getting their goods from China to produce their products. It was said that all should be back to normal by the end of February, but we are doubtful – airlines have canceled flights until the end of March.”

In India, freight forwarders are bearing the brunt of the country’s reliance on China for both electronics and auto supplies.

Jiss Mathew, director of Global Logistics Solutions India said, “The electronics industry is majorly hit and the lack of parts is going to affect this industry very badly. India’s automobile sector, which contributes 22% of the country’s manufacturing GDP, was also rescheduling launch dates of new models due to the massive delay in production.“

Forwarders are struggling to stay afloat

“With no revenue coming for approximately one month due to no landing of cargo from China, some of the medium and small freight forwarders will find it tough to continuing operating,” Mr. Mathew said.

He concluded, “Cargo volume growth in the past one-to-two years resulted in many new companies opening up for forwarding and for LCL consolidation, but the hyper-competition has resulted in low margins for all. But now cash flow problems can be a killer – there are horror stories of some freight forwarders and consolidators unable to settle their three-to-six month-old payables to agents and vendors with current revenue.”