Coronavirus outbreak in China may impact the supply chain: Xiaomi

The Indian phone industry relies heavily on components and sub-assemblies from China, which is in the grip of the coronavirus outbreak.

12th Feb 2020
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India's largest smartphone vendor Xiaomi on Wednesday said the extended shutdown in China due to the coronavirus outbreak is likely to hit the supply chain, and that there is a risk of impact on component supplies.


The comments resonated with others in the industry like POCO and industry body ICEA expressing concern over the supply chain disruption and its ramifications for India.


The Indian phone industry relies heavily on components and sub-assemblies from China, which is in the grip of the coronavirus outbreak.


The death toll in China's novel coronavirus outbreak has gone up to 1,113 with 97 new fatalities reported mostly in the worst-affected Hubei province while the confirmed cases of infection jumped to 44,653.


"The extended shutdown in China is likely to have an impact on our supply chain and there is a risk of impact on the overall quantum of component supplies... We are working to explore alternative supply channels for components and raw materials," a Xiaomi spokesperson said.
Coronavirus



The immediate impact is that the short supply might cause some negative pressure on prices of these components, the spokesperson said adding the company is still evaluating the situation.


"Business is critical, but the value of human life is the biggest priority for the company. The extended shutdown in China (if it continues) is likely to have an impact on our supply chain after some time and, there is a risk of impact on the overall quantum of component supplies. We are still evaluating this situation," a POCO spokesperson said.


India Cellular and Electronics Association (ICEA) said the phone industry in India is facing an unprecedented and tough situation as its supply chain is getting "badly impacted".


"This is an absolutely unprecedented situation... The industry is helpless," India Cellular and Electronics Association (ICEA) Chairman Pankaj Mohindroo said.


Mohindroo further said the supply chain management is getting "badly impacted", but noted that a handful of plants in China have now received permission to open.


Anshika Jain, a Research Analyst at Counterpoint, echoed similar sentiments.


"There will be an impact on manufacturing. Only 12 percent of components are sourced locally with the rest coming from exports. China is a key supplier. Supply of components like displays and SKDs will be hit," she said.


Jain added that the situation will impact Chinese players more than global giants like Samsung and Apple.


"We feel the supply situation may continue to stay under pressure for the next four to five weeks, and the phone industry will see an impact in the first half... Lack of workforce and travel ban for executives is likely to affect product planning and new launches," she said.


Jain pointed out that on the positive side, the first quarter is usually slow.


"Companies do factor in the Chinese new year holidays and stock up on supplies. The situation will give them the opportunity to clear the existing inventory of devices," she said.


Reports suggested on Tuesday that one of the large contract manufacturers and component suppliers has resumed operations in one of its plants in China; although it was operating with only a small fraction of its workforce.


The coronavirus outbreak and its perceived risk have cast a shadow on the upcoming Mobile World Congress (MWC), the largest mobile event and the industry's flagship annual congregation.


Heavyweights like Ericsson, Amazon, Nokia, Sony, and others have said they are withdrawing from the event that is scheduled to take place in Barcelona from February 24-27.


(Edited by Suman Singh)

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