How coronavirus is affecting the global tech industry

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The COVID-19 pandemic is unequivocally having a crippling effect on the global economy. Sectors that have been hugely hit include Travel and Tourism, Hotels, Restaurants, and Technology.

With the increasing number of factory shutdowns and cancellation of all social events, let’s take a quick look at how the technology space is fairing.

Techpreneur Magazine shares with you some Insights from E&T on the wreaking havoc of coronavirus on technology and engineering.

First of all, companies, where workers have been diagnosed with COVID-19, have had a rough time keeping operations going. Electronics giant Samsung in South Korea, for example, had to temporarily close assembly lines at its smartphone factories. Later, Samsung Display asked Vietnam to allow 700 engineers from coronavirus-hit South Korea to enter the country by saying they needed them to prepare for the production of screens for new smartphones, according to Reuters.

The next shockwave arrived when firms started canceling and postponing events. Facebook canceled its F8 developer conference, while Google called off both its Google News Initiative Summit and its I/O developer conference while changing its cloud conference to a digital-only event.

US tech giant Dell followed suit with its now virtual-only Technologies World 2020 conference. Various tech companies pulled out of the South by Southwest film festival, with its CEO saying it could cost them millions.

Apple CEO Tim Cook offered employees at most of the firm’s offices the option of working from home. The company joins a number of other tech firms in the San Francisco and Silicon Valley areas asking staff to work remotely. Despite previous research suggesting working from home may lead to improved performance and work satisfaction, doing this over a sustained period of time is counterproductive.

The coronavirus outbreak has affected European engineering companies that trade products with China. According to the German Institute of Economics, COVID-19 has the power to harm German economic growth due to its strong reliance on China. The German car industry is at considerable peril. Engineering companies in the UK are also afflicted, with Jaguar Land Rover moving parts out of China in suitcases to ensure supply, according to the Financial Times.

US Fiat Chrysler announced that it expects to halt production at its European plants, while South Korean and Japanese car giants Hyundai and Nissan have closed plants in South Korea.

Misinformation about the pandemic has quickly spread on social media. Tech platforms are to blame for this, at least initially. Full Fact, a fact-checking organization, said that false claims and conspiracy have been spread partly via social media. Now Google, Twitter, Facebook, and Instagram have started to collaborate with health authorities to counteract misleading information.

The financial performance of major western tech companies has not gone untouched, with the valuation of firms crashing in a short period. E&T’s analysis found that, as of 10 March, the impact on FAANG (Facebook, Amazon, Apple, Netflix, and Alphabet) companies to be severe – yet for some it was short-lasting. These Big Tech companies have lost on average 11.4 percent in their closing price since 24 February.

Changes in losses vary among big tech. Electronic Arts dropped by a mere 5.7 percent between 24 February and 9 March. However, TiVo, an American technology company licensing its intellectual property within the consumer electronics industry, and Tesla lost more than 27 percent.

UK firms, including British Airways owner IAG and Diageo, which makes Guinness, warned about the effects of the coronavirus on their business, saying that demand was being affected by the outbreak.

The outbreak has really hurt China and its engineering sector. E&T gained exclusive access to satellite data, confirming a precarious fall in China’s business activity. Satellite data monitoring of more than 5,000 industrial locations shows a major slump in activity across the country. The SpaceKnow Satellite Activity Index, measuring the level of reflected or emitted radiation among spectral bands, shows a dramatic disruption in market activity. The country has not seen such dire conditions since its stock markets crash five years ago.

Not all commentary is so bleak, however. Some see opportunities in the outbreak. The Financial Times South China correspondent Sue-Lin Wong wrote that the epidemic bears opportunity for Chinese tech companies in a marketing boon for firms selling products and services in a way that allows fighting the virus through “contactless delivery”. One industry body counted a list of more than 60 firms pledging tech solutions to battling the problem.

Despite some hope across various Asian technology value chains, COVID-19 continues to cause mayhem. Some saw it coming early. CEO Shuntaro Furukawa admitted in a news briefing at the end of January that Nintendo’s production in China was already affected.

The 5G smartphone market should also brace for mounting pressure, say analysts. According to market experts at Omdia, a global technology market research firm, “coronavirus has the potential to disrupt the progress of the next-generation wireless standard, as the crisis slows or threatens to slow the production of key smartphone components, including displays and semiconductors”. Because the disease would spread throughout the global technology supply chain, it also hits the interconnected sectors of the electronics industry. Globally the pandemic is so potent and likely to cause disruption because China accounts for more than a quarter of the market share, making it the largest smartphone economy in the world.

As China emerged as the epicenter of the outbreak, Omdia experts adjusted smartphone market growth predictions for the country. It originally expected it to stop declining and start rebounding in 2020. Now it thinks China will be hurt by another contraction in smartphone shipments.

Diminished consumer demand in the form of reduced domestic smartphone sales is at the heart of the problem. “As the outbreak period lengthens, weakening demand will extend to other regions,” analysts say. But to what extent the market is effected will entirely depend on the duration of the pandemic. China’s output could nosedive as much as 50 percent due to component shortages. Fredrik Jungermann, an expert on 5G smartphone markets at mobile data analytics company Tefficient, told E&T that there should be an impact on the South Korean 5G smartphone demand but it is too early tell. Any impact on the country’s 5G market – which experienced a slowdown at the onset of the virus – should be visible by the end of March when February figures are released.

As people are advised to stay indoors, a beacon of hope is a positive impact on the global gaming market. Player engagement and in-game spending in the Chinese games market has, so far, benefitted. However, supply chain disruptions are too severe and have outweighed any bonus, tipping the overall balance back into negative territory.

The semiconductor sector is also at a peril, although not immediately. Slumps witnessed in other sectors have, so far, remained absent for semiconductor production. If the disease keeps causing public-health problems, however, Chinese electronics manufacturers may be forced to slow manufacturing or even shut down some operations entirely. It has the potential to affect supplies and firms purchasing large volumes of chips to produce end-products.

How can we prepare for this kind of pandemic happening again? Futurists already see one answer to future outbreaks in preparing advanced robotics to reduce labour costs and increase productivity, while preventing costly shutdowns of consumer electronics and smartphone plants.

As radiography and CT imaging will play a fundamental role in mass screening and diagnosis of suspected sufferers of coronavirus, experts see medical imaging tech affected. In a perfect future, AI-powered recognition could help drive case prioritization and to identify indicators and symptoms of COVID-19, in particular pneumonia.

Source: E&T (Engineering & Technology)

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