Eleanor Wenman from the Asia Media Centre takes a look at some of the supply chains feeling the pinch from the Covid-19 pandemic.
There’s no denying China is a major hub for global manufacturing.
But when COVID-19 hit and officials started implementing city- and province-wide shutdowns, many Chinese factories fell silent. Supply chains for some of the world’s biggest companies stopped flowing.
While some factories are reopened, Chinese officials have recently extended the shutdown of non-essential businesses in Hubei until March 11 and manufacturers around the globe are feeling a second wave of supply chain disruptions, as the flow of products and parts coming out of China is reduced. Experts are predicting the impact on global supply chains could peak in mid-March.
The Auto Industry
According to the Financial Times, last year, China’s total value of exported auto parts had a value of more than $US60billion and about 80 per cent of global car production involved parts made in China.
Wuhan, the epicentre of the outbreak, has been dubbed China’s “Motor City”, and the Hubei province hosts manufacturing plants for many companies: Renault and Peugeot have factories based in the province, as do Germany’s Volkswagen and BMW, US’s General Motors and Britain’s Jaguar Land Rover.
While some factories have slowly been reopening, a second wave of disruptions is being felt outside of China as both delays in receiving parts and expanding coronavirus quarantines are impacting factories worldwide.
European auto supplier MTA shut its main plant in northern Italy, following a jump of coronavirus cases in the country requiring quarantine. MTA supplies components for production lines at Fiat Chrysler subsidiaries. European car manufacturers are warning further shutdowns may come into effect on the continent.
Hyundai’s Ulsan factory in South Korea was closed in early February when an employee was diagnosed with coronavirus and other Asian countries are facing factory closures, due to both the spread of coronavirus and the second wave of disruptions.
China is the world’s largest manufacturer of smartphones – and even companies which have their main production plants based outside of China find themselves relying on supply chains going back to the country.
Apple was hit by Chinese factory shutdowns early February, when Foxconn, one of the global tech giant’s major suppliers, extended a shutdown of its factory complex in Zhengzhou. More than 200,000 employees were put on hold until on February 18, when the complex reopened.
In a statement, Apple said that “worldwide, iPhone supply will be temporarily constrained”, due to its production sites in China ramping up more slowly than expected.
Apple has warned of iPhone shortages as its contracted manufacturers in China recover from the coronavirus shutdown.
For Samsung, two thirds of its phones are produced in Vietnam, but many of their operations rely on supply chains coming from China. In response to the coronavirus, Vietnamese officials closed or restricted trade across land routes, forcing Samsung to fly in parts from China to meet production demands.
In late February, Samsung was forced to temporarily shut down one of its South Korean factories, due to one of its workers being diagnosed with the coronavirus.
In the tech realm, Microsoft has also warned of potential supply chain delays and contract equipment manufacturer Jabil – which supplies parts for Amazon, HP, Nokia and more – has been operating at two thirds of it full capacity.
Toys and Games
Toymakers aired their concerns about their own supply chains at one of America’s largest toy trade fairs this February.
During the 117th annual New York Toy Fair, industry experts warned the shutdown of factories and design offices in China could mean fewer seasonal toys and fewer toy launches this year, according to Forbes.
One of the world’s largest toy production companies, Hasbro, is already feeling the pinch. On February 21, the company announced the coronavirus outbreak was disrupting its supply chain in China and limiting the output of products for sale worldwide. Two-thirds of the company’s global toy supply comes from China.
Hasbro is the company behind toys and games such as Play-Doh and Monopoly.
Seasonal fashion, alongside global fashion shows, are being pushed back or outright cancelled. The Milan Fashion Week drew media attention when designer Giorgio Armani announced the fashion show would be livestreamed behind close doors, rather than gathering large numbers of people together, while other shows in Beijing and Shanghai have been cancelled.
In terms of supply chains, China is a hub for global clothes manufacturing. More than a third of all clothing and textiles globally are manufactured within China, including high-end labels like Prada as well as fast fashion brands like H&M. Delays in Chinese production are expected to push back releases of seasonal clothing over the next few months.
Water, whiskey, and soft drinks are all feeling the flow-on effect of the coronavirus.
Danone, which makes Evian bottled water as well as Activia yoghurt, temporarily closed eight factories in China during the shutdown. Seven factories supported its bottled water production. Production started again in mid-February, but Danone is facing the same issue as many other companies: One of its big markets, China, has stopped spending as usual.
Similar to Danone, drinks company Diageo, which produces Guinness and Johnnie Walker among others, has reported the closure of bars and restaurants in China will lower their profits through to March at least.
With events cancelled across Asia and reduced air traffic – meaning less chances for people to buy a drink at the airport bar – are also impacting sales.
Meanwhile, drink giant Coca-Cola has run into problems sourcing artificial sweeteners from China, with productions and exports delayed for Coke’s suppliers.
– Asia Media Centre
Author: Eleanor Wenman