Impact of Coronavirus on Distributors of Electronic Components

This article appeared in Source Today and has been published here with permission.

Over the last months, there has been a great amount of global media coverage on the new coronavirus (COVID-19). The range of data differs from facts and figures to unrefined conspiracy theories. So before jumping into an investigation of the effect of coronavirus on distributors of electronic parts, we'll give a short update.

The current coronavirus situation (March 2, 2020)

Factsheet from the World Health Organization (WHO) Report (March 2, 2020):

• Origin: Wuhan city in Hubei province, mainland China
• Infected: 88,948 globally
• Death toll: 2,915 in China, 128 outside of China

The quantity of contaminated individuals is expected to top mid-February, as stated by epidemiologists.

Mortality of coronavirus has just outperformed the affirmed passing of the last more prominent plague, SARS. The SARS infection cost 773 lives in a timespan from 2002 until 2003. It is evaluated to have cost the worldwide economy around $40 billion. It is undeniable, that coronavirus will affect financial development figures all around the globe. It is expected to be substantially more costly than SARS, influencing each industry branch worldwide. These conditions have already hit stock markets on a global scale.

Impact on the Electronics Industry

The electronics industry isn't making an exemption here. In the most recent weeks almost every maker has given out explanations on how the coronavirus and initiated quarantine in China is influencing their lead times. Moreover, numerous organizations have declined to participate in significant exchange fairs—for example, Embedded World. Coordinators of the Mobile World Congress in Barcelona even cancelled the event.

How are Distributors of Electronic Components Prepared?

Distribution companies have a significant role in the electronics industry. They give certainty on part accessibility to an incredible number of manufacturing companies worldwide. That is the reason we asked two key players the effect of coronavirus on the distribution business and what they have learned from the SARS outbreak 18 years ago.

We’d like to thank Teri Ivaniszyn, Digi-Key Electronics vice president, Operational Excellence, and Geoff Breed, vice president marketing – Europe, TTI Inc. for answering our questions.

What were your first steps in communication regarding this issue?

GB: TTI strives to provide the most up-to-date information and communication on such serious and critical topics. We have prepared a full and live update on our global websites, so that customers have a centralized and consistent resource for information. We are continually working closely with all our suppliers to understand and communicate the actual situation and any consequential effects that it might bring on.

TI: “The health and safety of our team members, customers and business partners is of primary importance. We fully support any workplace accommodations that reduce potential risk and encourage compliance with government guidelines dealing with the issue.

• We are proactively communicating with our supplier partners to gauge the impact for them.
• ECIA (Electronic Component Industry Association) has provided us insights and analysis on the topic to monitor the situation.
• We have relationships with multiple logistics carriers and will utilize all of them to best serve our customers.
• Carrier partners such as UPS, FedEx, DHL and Maersk are working to mitigate impact on customer’s cargo plans.

 To what extent is your line card affected by the virus outbreak and the restrictions by Chinese government?

GB: It is still too early to say. We know that suppliers who have manufacturing in the area have delayed resuming production and return of staff for another week after the Chinese New Year. Beyond that, we are working on a daily basis with our supplier partners to understand any further restrictions.

TI: We anticipate minimal impact to our line card and may in fact see increased demand for safety related products and devices.

The last mentionable virus outbreak was in 2002/2003 with the SARS virus. How did this affect your supply chain then, and what measures did you implement to conquer future comparable disaster, such as corona virus now?

GB: Of course, it is very difficult to be completely prepared for any such issue, as they are relatively infrequent. SARS was 17 years ago, and the face of our industry has changed dramatically in this period.

At TTI we always look ahead and try to minimize issues of any kind by keeping the widest and deepest inventories in the market. We also forecast well ahead with our supplier partners to make sure the pipeline is in place. Our world class inventory management systems ensure that “if” supply chain issues deepen, we protect our customers to the fullest.

TI: The depth of product Digi-Key carries minimizes the effect for our customers.

Industry research and analysis have predicted the possibility of short-term slowdowns in automotive, airlines, travel and entertainment. But if history repeats itself as with the 2003 SARS crisis, a single-quarter decline in China’s GDP growth was largely offset by higher growth in the subsequent two quarters.

ECIA research also points out:

• China is now in the internet commerce age, with consumers increasingly shopping more online.
• During SARS and other prior outbreaks, the markets have typically proved resilient.
• Analysts found that among companies they covered none suffered long-term effects from the 2003 SARS outbreak.

This interview has shown the impact of coronavirus on distributors of electronic components is incalculable at this point. Make sure to stay updated on relevant topics in the electronics industry.