Coronavirus is starting to hurt tech companies. This is how.
In the past few weeks, something completely unexpected has start to adversely impact US big tech — in a dramatic fashion.
On January 30 2020, the WHO declared the coronavirus outbreak a public health emergency of international concern. I don’t write this to scare you; I write this to analyze how coronavirus is impacting the business of technology.
What is coronavirus? How viral is it?
COVID-19, the formal name for coronavirus, is spread mainly from person-to-person. The Center for Disease Control cites likely spreading from respiratory droplets — specifically when they land ‘in the mouths or noses of people who are nearby or possibly be inhaled into the lungs.’ Common symptoms include fever, cough, and shortness of breath. The CDC believes that symptoms may appears between 2–14 days after exposure.
Scientists use something called reproduction number (r-naught). It is used to quantify the intensity of certain viruses, outbreaks, and pandemics. Below is a chart comparing the reproduction number of various infections.
As you can see, the Wuhan coronavirus reproduction number estimate is broad and relatively unknown. Researchers at Chinese Academy of Sciences Institute and the University of Chinese Academy of Sciences have predicted the reproduction number to be as high as 4.08. While this may look like an arbitrary number, r-naught is the paramount of epidemic theory. R-Naught is the amount of secondary cases that are derived from one case. For example, when one person gets coronavirus 1.4 to 4.08 people are infected.
That measles figure should really scare you.
Cool science, nerd. How does it impact big tech?
China, the birthplace of coronavirus, is the second-largest economy. Furthermore, China is a production hub for the majority of the largest companies around the globe.
I think you see where I am going.
China has entered into an internal state similar to that of war-time. They are starting to lock down their economy in an effort to suppress this virus spreading. The nation has put restrictions on over 780 million people. Because of this restriction consumer technology production has come to almost a halt. On February 19th 2020, the following stocks took a nosedive: Microsoft, Amazon, Google, and Amazon.
Microsoft produces almost all of their products in China. Apple produces iPhones and iPads in China. Google produces the Pixel in China. Amazon sells and sources from China. You get the point.
These companies can’t produce their products because of these restrictions. It has gotten so bad Apple has reduced revenue estimates. Yes, Apple (the biggest tech company in the world) announced an extremely rare company advisory. Tesla did the same.
It is the perfect storm.
Because of this outbreak, we can see how important the Chinese economy is to the US tech industry. Coronavirus has lead to supply chain interruption, a shortage in production, and a shortage in demand. All three of those things are taking their share back out of the pie.
Ideally, coronavirus is extremely close to being quarantined or cured. Both for the sake of humanity and the tech industry. If things continue to get worse, we will likely see a downturn in global production and global consumption as the East Asian economy dramatically slows down.
