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Impact of COVID-19 Outbreak on the Tech Industry

Covid- Tech Industry
Published on Apr 21, 2020

With COVID-19 heralding a severe impact on business operations, industries and companies are grappling with exponential spread of the contagious disease. With global impact of COVID-19 across industries being immense, the tech industry is also one of the highly affected industries as factors like hindrance in work travel, cancellation of tech events worldwide, limiting staff operations are impacting the operations of the tech companies. Apple has reportedly stated that it won’t be able to achieve its quarterly revenue target due to the virus. Its stores being shut in various countries due to nationwide lockdowns is hampering the sales. The outspread of the virus has even led Facebook and Google to pull out of the SXSW festival.  

Delays in Supply chain will impact Electronics Industry 

The supply of raw materials needed for manufacturing mobile phones, machines, robots etc has slammed since transportation took a back seat. The tech industry, which is a hub of innovation and supplier of world changing technology ideas, has halted due to the novel coronavirus. There is an interruption in the supply chain across the globe.  

Most tech companies in the US import parts and components from China. Now that the Chinese economy is getting back on track, with just 30% of small businesses resuming production, there are still some hiccups in the process and a long way to normalcy. Due to this, it has become challenging for the companies in the US to avoid disruption in production. Companies such as Apple, Deere & Co., Caterpillar are Morton Industries are seeking out local tools and components suppliers. The cost of tools and components are soaring high, approximately 30% higher than the Chinese components, as there is limited supply and high demand. Around 40% of the global suppliers and manufacturers believe that consumer electronics will suffer the most due to COVID-19, as shown below in the graph.  

Ripples across the tech market 

A vast number of tech companies are projecting low revenue. Microsoft has announced that due to the slow pace of the supply chain in returning to normal operations, in Q3 of fiscal year 2020, the company does not expect to meet its More Personal Computing segment guidance as Surface and Windows OEM are hugely impacted than anticipated.  Goldman Sachs stated that US companies won’t be generating any earnings growth in 2020.  

On the other hand, while Microsoft has lost revenue in one segment, its Microsoft Teams has gained extensive popularity – hitting a new daily record of 2.7 billion meeting minutes in one day. According to Investor’s Business Daily, companies like Zoom video, Netflix and Domino’s Pizza have emerged as winners in this situation of crisis.  

Final Words – Long term impact of COVID-19 

The second half of the fiscal year will witness tech companies resurrect their products and gadgets. More than 50% of the global technology supply chain is dependent on China therefore, the global tech sector is bound to face massive disruptions. The pandemic has already caused the smartphone production to slip down to 12% while, smartwatch production declined around 16%. Other consumer electronics such as Smart Speakers, Laptops and PCs have also witnessed a decline in their production. It is a possibility that the tech industry might not see immediate impacts of coronavirus, but a downward graph of the production can lead to loss in revenue for tech giants in the near future.  Data analytics, driven by ML and AI, can provide deep insights about the future market conditions. In order to increase the growth rate of the tech industry, companies must leverage the power of comprehensive research and analytics to ensure accelerated growth.