The breakout of Covid-19 disease, also know as coronavirus has resulted in over 2,000 fatalities – only of these deaths happened outside China – and 75,000 infections as of the 20th of Feb. As most governments hasten to restrain the further spread of the epidemic, global business – especially the technology sector – is beginning to feel its effects.
The world’s second-largest economy has suspended the production of consumer products like clothing, phones, and automobiles for the past few weeks. China has taken extraordinary measures to restrain the further spread of the virus, like installing mass quarantines in major cities and placing tough restrictions on 780 million people.
This curfew on Chinese manufacturing has made the global markets to tremble and is increasingly casting a shadow on the economy. The tech industry has been hit particularly hard because it relies heavily on Chinese labor to make almost everything from cell phone parts and computer chips. Recently, to reestablish its economy, China has reopened some of its factories – despite health risks. However, the manufacturing plants are operating at a much lower capacity than they normally do.
It will take a while to get the complete financial impact of this epidemic but early signs are not very pleasant. For instance, the world’s most valuable tech company – Apple – said that it will reduce its revenue goals for the first quarter. Tesla is wary of the risk of this outbreak to its business. Chinese firms are also feeling the heat with tech giant Alibaba calling this outburst a “black swan” event. Social media companies, however, are feeling less financial impact compared to companies like Apple because they don’t primarily deal with physical goods. In general, the social and economic repercussions of the epidemic on the tech industry has put stress on the close relationship between China and Silicon Valley, not only for the manufacturing sector but also for academic collaboration, investor capital and supplying of skilled workforce.
Amazon has felt the impact of this virus. An estimated 40% of Amazon sellers are in China, meaning that a big amount of the products that people purchase come from China. Moreover, many US-based sellers get their products from China. The country is America’s third-largest export market, it is also the largest growing destination for American products. The extent of the impact that the virus has had on US tech companies goes to show how dependent they are on China. Analysts are hoping that this disturbance is only temporary and that things will go back to normal.
