SARS Virus Attacks the Electronics Industry

BOSTON, MA -- The rapid spread of Severe Acute Respiratory Syndrome (SARS) in the People’s Republic of China and other Asia-Pacific Rim countries threatens to derail the trillion-dollar global electronics industry, according to a report by Aberdeen Group, a leading IT market analysis and positioning services firm.

With the health epidemic growing across Asia, manufacturing disruptions, travel bans, and transportation delays related to SARS jeopardize the availability of semiconductors, electronic components, low-level assemblies, and system product sourced in the PRC and nearby countries.

"For the past 18 months, digital consumer technologies such as wireless home networking gear have sold strongly and continue to be a bright spot. Unfortunately, most of this technology is produced in the Asia-Pacific region, and particularly the PRC," said Russ Craig, a digital consumer technology analyst at Aberdeen and co-author of the report, SARS Virus Attacks the Electronics Industry.

"While global consumer demand is surging, the ability of suppliers in this region to provide the goods and services that support high levels of growth simply might not be there," Craig added. "As an example, the PRC is a major source of AC-to-DC power supplies -- those little black cubes that clutter your power strip. You can assemble a laptop elsewhere, but you cannot sell it without a power supply. Thus SARS threatens the supply of key component building blocks, not just the assembly plants."

The SARS epidemic originated in China's manufacturing-rich Guangdong Province, home to many semiconductor and electronics firms, and is reportedly spreading through other key regions that supply the global electronics market. Components manufactured here end up in myriad consumer products, such as PCs, laptops, wireless networking gear, DVD players and televisions, all of which are also manufactured in the region.

Aberdeen cites examples of the early effects of SARS to date. Among the impacts: many Taiwanese companies are suspending travel to the PRC and Hong Kong due to health risks, and Compal, a major manufacturer of laptops for Dell and HP, has barred employees from those areas. Aberdeen research finds that U.S. semiconductors executives are contemplating delaying trips to the region.

Aberdeen also outlines scenarios that would cause significant disruptions to the global electronics industry, ranging from schedule slippages and disruptions in growth plans for global electronics companies, to a worst case of major supply chain disruptions and a potential 'nuclear winter' for the semiconductor and electronics industry.

Craig notes that Western electronics firms will face significant challenges if their suppliers experience major disruptions. "These firms need to have contingency planning in place to mitigate the damage to P&Ls should their suppliers have significant delays and disruptions," Craig said.

SARS Virus Attacks the Electronics Industry is available for free by visiting www.aberdeen.com.

Aberdeen Group is a leading IT market analysis and positioning services firm that helps Information Technology vendors establish leadership in emerging markets. Aberdeen is accessible via the Web at www.aberdeen.com.

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