The Impact of the Coronavirus on Electronics Manufacturers
23. March 2020
By Shawn DuBravac, IPC chief economist and Matt Kelly, IPC chief technologist
According to IPC’s recent Coronavirus impact study (March update), roughly 22 percent of electronics manufacturers and suppliers reported that the coronavirus outbreak will result in fewer new product introductions (NPIs) in 2020.
In a normal year, original equipment manufacturers (OEMs) would be readying the production of new products to be released in the coming year. This is especially true for consumer electronics manufacturers, which tend to follow six- to 12-month cycles and aim to release NPIs in the fall months just ahead of the holiday shopping season.
Electronics manufacturers in the OEM supply chain would generally prepare for NPIs by traveling several times to visit input suppliers in the lead-up to full-scale production. Each of these trips would last up to a few weeks and would involve all aspects the NPI process, including design tweaks, incoming component supply, assembly, and test process definition, product qualification, reliability assurance, manufacturing yield assessment, and final product fulfillment models – all in preparation to support ramp to volume production requirements.
Corporate travel bans have canceled many of these trips and left engineering teams rushing to develop alternative approaches. Some are turning to U.S. firms to help. Because build schedules are already extremely tight, delays of any kind could impact planned product release dates. In short, the coronavirus outbreak is causing delays that could affect planned NPIs.
Some companies are already reporting such impacts. Arlo Technologies, a maker of wireless security cameras, noted in its fourth-quarter 2019 financial results conference call that “coronavirus is impacting our business on the supply side as our vendors do not have sufficient quantities of the required components to fulfill our demand … Additionally, in the second quarter, we have new product introductions planned that we believe will be impacted by the component shortages, as well as delayed delivery of some of the manufacturing equipment from China.” Logitech noted in a statement that “due to the availability of labor and varying timing of component supply recovery, there is potential for delays to new product introductions.”
Because of the long lead times involved, timing constraints and travel bans that hinder collaboration between designers, engineers, and manufacturing facilitates could also impact NPIs in 2021, even if other impacts from the coronavirus outbreak are reversed quickly.
To read the full report, click here.