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Reports: Coronavirus Sending Rippling Damage Throughout Tech Industry

(Image credit: Mike Laptev/Shutterstock)

With a handful of RAM factories located in China, DigiTimes reported today that under 30% of factory employees have returned to work amid the coronavirus outbreak. DigiTimes reported today that fewer than 30% of factory employees have returned to work, citing unnamed "sources in the memory industry."

The publication also cited anonymous sources "from the upstream supply chain" and claimed that some factories, namely ODM plants based in Kunshan, China and owned by Taiwan-based companies, have only seen about 1,000 out of 9,000 employees return to work.

Sources in the RAM supply chain reportedly believe that materials inventories could "fail to support their output after mid to late February."

Before the outbreak, low RAM prices were driven by huge inventories and typical market fluctuation. At the beginning of this year, there were predictions that DRAM and NAND prices would rise as much as 40% throughout 2020. But with the coronavirus outbreak impacting the tech industry and the world, the future is uncertain.

Meanwhile, it's already been reported that consumer demand in China for graphics cards and motherboards has already dropped

Unnamed Digitimes sources also claimed Acer and Asus, which have large customer bases in China, are experiencing large setbacks, with Acer's January revenue stream down by 41.8% and Asus' stream down by 29.1%. These drops were attributed to a combination of the labor shortages in local factories, reduced supplies from their supply chain and reduced demand from local markets. 

If the reports are true, it could mean that coronavirus will play a significant role in how various tech markets perform this year. 

"Since Asustek has a large portion of motherboard, graphics card and gaming notebook shipments to China, the Taiwan-based brand's profitability in the first quarter is expected to slump dramatically," DigiTimes said. 

"Since labor and components shortages are unlikely to be fully resolved before mid-March, the two Taiwan-based brands' operations in the second quarter may remain weak."

  • digitalgriffin
    So Asus is complaining about supply being down and demand being down? Technically speaking these should offset one another in terms of consumer pricing. It still hurts Asus's bottom line however as revenue will drop.
    Reply
  • bit_user
    digitalgriffin said:
    So Asus is complaining about supply being down and demand being down? Technically speaking these should offset one another in terms of consumer pricing.
    The problem with this is likely to be that they'll not be able to source a few critical components, which would drop their output of certain products to zero. Since demand would not go to zero, we could see some fairly wild price instability.

    You might think that demand could simply shift to comparable products from another manufacturer, however if there are certain suppliers that are systemically important to the industry and cannot fulfill orders, then there might be nowhere else for demand to shift.

    Another consideration is that demand from outside China is not likely to drop by much. That's another reason I expect to see price spikes and out-of-stock notices on certain classes of products.
    Reply
  • froggx
    digitalgriffin said:
    So Asus is complaining about supply being down and demand being down? Technically speaking these should offset one another in terms of consumer pricing. It still hurts Asus's bottom line however as revenue will drop.

    Assuming the price remains the same (which, imo, is fair enough, since supply and demand analysis is already a simplified model and we aren't throwing around numbers) the price will actually end up rising. Selling fewer units at the same price increases the cost per unit for Asus so the supply curve will shift even further and ends up intersecting the demand curve at a higher price. Then there's the effect of the increased marginal cost from the increased price of precursor components and other fun stuff making the situation for Asus even worse, but things start to get more complicated than I care to dig into when I can just say, "coronavirus kinda sucks hardcore."
    Reply
  • froggx
    bit_user said:
    The problem with this is likely to be that they'll not be able to source a few critical components, which would drop their output of certain products to zero. Since demand would not go to zero, we could see some fairly wild price instability.

    You might think that demand could simply shift to comparable products from another manufacturer, however if there are certain suppliers that are systemically important to the industry and cannot fulfill orders, then there might be nowhere else for demand to shift.

    Another consideration is that demand from outside China is not likely to drop by much. That's another reason I expect to see price spikes and out-of-stock notices on certain classes of products.

    I could be super wrong here, but it seemed that electronic component manufacturers have been trying to move out of China due to the trade war with the U.S. and companies outside China (e.g. Samsung) were gaining market share. If there is a certain IC only made in China it could be a problem, but more basic components like capacitors and resistors are made in multiple countries. Unless I'm behind on news, China is pretty much the only place shutting down. Also there's always that one guy that shouts "it's for the good of the colony!" and (in a manner leading to the automation randomly groaning and sparking while bordering on a cyberpunk paradise) runs the whole factory, albeit slowly with questionable QA. Also it seems like a good time to pull out the surplus every company seems to have lying around in mislabeled crates at the back of a decrepit warehouse built during the Cold War.
    Reply
  • bit_user
    froggx said:
    I could be super wrong here, but ...
    Yeah, I'm not speaking from actual knowledge of the industry. Just hypotheticals.

    It seems we're still in agreement that random supply shortages and price spikes seem likely.
    Reply
  • justin.m.beauvais
    It seems like there is a lesson about diversification in here somewhere. Quantity of eggs in number of baskets and such. They should probably look into spreading out manufacturing once the illness has been taken care of, if any of us survive. The way the media is cracking on about this makes our survival seem questionable.
    Reply