Coronavirus Update – Trendfocus

This is an Executive Brief by Trendfocus, Inc.:

Coronavirus Update

Not since the Thailand floods of 2011 has there been another “disaster” that has led to widespread worry and fear – on the basis of limited information.

There is a great deal we do NOT know.

Here is what we DO know:

• As of February 10, there have been over 40,000 reported cases of Coronavirus in China alone, with over 1,000 fatalities. Many observers fear that that the China government is under-reporting the actual numbers. However, the World Health Organization (WHO) appears to be actively involved in hospitals in the Hubei province, so there is at least a third-party to potentially counterbalance data flow.
• The extended Lunar New Year holiday concluded on February 9, and workers began the resumption of work on February 10. The New Year holiday is always a catalyst for worker turnover and (temporarily) lower factory efficiency across many industries. The difference this year is the 2-week duration of the holiday (usually it is closer to one week, but the government extended it in an effort to keep travel – and the spread of the virus down) and ongoing travel restrictions in many large cities and provinces.
• Thus far, reported cases in surrounding Asian nations and around the world are, by comparison, miniscule, suggesting that many containment lessons were learned from the SARS event in 2002-2003.
• There have been conflicting reports from websites and other sources about the disruption in China factory operations, but with limited “boots on the ground” there, it is difficult to verify fact from (government) fiction. In fact, there was an article published by Storagenewsletter.com stating that DRAM and NAND factories in China are operating as usual. Consider us a bit skeptical on this blanket claim (which originated from Taiwan, not Storagenewsletter.com itself). On the other hand, trade tensions in 2019 are said to have compelled many Chinese tech firms to increase inventories of key parts in case sanctions or restrictions hurt supply. We cannot quantify this, however.
• While companies are trying to keep a lid on any information flow related to possible effects, the HDD and PC supply chains will probably experience some disruption. These industries, while important, may be impacted by both worker shortages and transportation challenges. There are data points that suggest PCBA supply and associated board components could be challenging in the short-term.
• Any disruption to the resumption of component or product production and material movement in the supply chain should begin to constrain product availability over the next couple of weeks with any depletion of buffered inventory. Again, the specifics on this are very unclear and will likely be highly dependent on the individual product or component involved in the disruption. 

Trendfocus is watching this situation carefully and will, as data and trends surface, provide additional color. Our assertion is that actionable data is still 10-14 days away and depends largely on dust settling around worker mobility and transportation restrictions.