Greenlight Insights analysts have been in constant discussion with the supply chain and vendors in China on the developments and impact of the coronavirus. Here is what we know so far.
The latest toll of the coronavirus as of February 5th is as follows:
- Nearly 500 people have died worldwide and there are 24,600 confirmed cases.
- There are 147 confirmed cases across 23 countries outside of China, including 12 cases in the US.
- A growing list of countries imposed unprecedented restrictions on travel to and from China. The US State Department advised Americans not to travel to China. Foreigners who have been in China during the previous 14 days are barred from entering the US, while returning citizens face a 14-day quarantine. Other countries are adopting similar guidelines.
- Most airlines have canceled a growing number of flights to China. For example, American Airlines and United Airlines suspended their flights to and from mainland China through the end of March. Nearly 10,000 flights have been canceled since the start of the outbreak.
- A large number of companies have restricted travel to China and asked overseas employees currently in China to return.
- A growing number of companies have extended the Lunar New Year holiday and shut down operations until February 9th throughout China, this includes both manufacturers and retailers. Apple announced all of its 42 stores are now closed until February 9th. Walt Disney shut its theme parks in Shanghai and Hong Kong. Starbucks closed more than half of its stores and McDonald’s shut down several hundred of its 3300 stores.
- China had extended the Lunar New Year holiday until February 2nd. A recent survey conducted by Zhaopin shows that over 60% of enterprises resumed work after February 2nd and nearly 20% of that will reopen after February 10th.
- Major cities have gone into mandatory lock-down. Wuhan and Wenzhou, which have 9 million and 11 million citizens, respectively. Roads were closed and people were shut in their homes.
- China issued a number of measures to boost its economy and stabilize its stock markets as a result of the coronavirus. These included:
- $174B in additional liquidity with the People’s Bank of China. The money will be supplied using reverse repurchase agreements to ensure liquidity is reasonably ample during the outbreak.
- Banks were encouraged to lend more and not call in loans to companies in Hebei province or other affected regions. Interbank liquidity will be ensured.
- Once the coronavirus is brought under control, policymakers are expected to shift their focus to the economy and boost infrastructure and consumption.
The impact of the Coronavirus on the virtual reality and augmented reality (xR) industry, the latest we have heard is as follows:
- The coronavirus has disrupted the operations of technology firms with supply chains rooted in China.
- Oculus production and distribution partner, Xiaomi, expects supply shortages for several products, including Mi VR Standalone headset. It is expected that the situation could resume normally after February 10th, when most of the factories reopen.
- Most of the technology firms adopt lean manufacturing, thus a longer recovery period is expected to catch up with the market demand.
- Facebook has restricted all employees from traveling to China. Travel restrictions may negatively impact product development, as key employees are prevented from traveling to key suppliers in China.
- One executive we spoke to suggests its company may move its production to Vietnam in order to make up for its depressed Chinese capacity.
- Several major industry trade events have been postponed or canceled.
- Pico, a top Chinese virtual reality company, has canceled its February 12th launch event for the Pico Neo 2 in China. The new official launch date is still not yet announced.
- Huawei has postponed its annual developer conference, HDC. Cloud 2020, which was scheduled to take place on March 27-28 in Shenzhen.
- LG has announced it will drop out of Mobile World Congress (MWC) 2020, while ZTE has canceled its press conference on MWC. However, a number of big names from China such as Huawei, Xiaomi and Vivo remain on the show.
- With more international VR/AR events coming in the next few months, participation from Chinese companies will be critical in determining their exposure to consumers and opportunities to cooperate with worldwide companies.
- Regarding VR/AR end-users:
- VR device sell-through will be significantly impacted by the lack of shopping during the extended lockdown. Online sales will also experience a drop due to supply shortage and insufficient labor for logistics. With retail and company shutdowns being extended, the year-to-year drop will likely grow larger.
- In January 2020, Steam hit a record for concurrent VR players, but the number of Chinese players decreased by 4% from the previous month.
- Many VR arcades located in China closed in observance of the Lunar New Year holiday, and several announced extended closures to mid-February.
With the coronavirus situation developing on a daily basis, Greenlight Insights is tracking developments to determine the unfolding impact of technology products and markets we cover. Check back for frequent updates on this topic.