Insight: Coronavirus Vs Technology Industry - the impact of the virus and speculations on the future
The year 2020, so far, has not been a year full of great expectations, as most people predicted by the end of 2019. With the advent of the novel COVID-19 virus, companies worldwide are facing difficult challenges, as many countries are closing down their borders and enforcing nationwide lockdowns. Industries will have to think outside the box to work from within and collaborate with other industries to sustain the economy.
What does this mean for #tech?
Generally, a global lockdown will result in two major factors:
The disruption of the supply chain
The disruption of consumer demand
For the past few weeks, in the tech industry, we have seen low consumer demand in various countries on items like smartphones, household electronics (washing machines, microwaves, etc...), and automobiles, whereas high consumer demand has been observed on cloud computing, network infrastructures, and PCs. This is due to the fact that companies still want to be able to operate and enable their employees to adopt remote working (We'll get back to that later).
Equally, the supply chain is being disrupted by national lockdowns and the closure of borders. Take a company like #Tesla for instance; before the coronavirus, their cars were in high demand and paid in full by the consumers at delivery. Currently, however, the situation is not conducive for car purchases as people are more concerned with stocking up on food and medicine rather than buying a Tesla, so the demand is very low. Tesla also gets a lot of its cars' components from various suppliers, which they pay after 2 to 3 months. With a low demand on their products (which will force a lower production), added to the fact that tens of thousands of theirs cars might be stuck in transit in some countries along with pending payments to suppliers and employees, we may witness a lot of cash being burned for an undetermined period of time. Although Tesla is very well capitalized, like many other businesses in their position, how long can they survive in this situation?
On the other hand, we have companies with new business models like #Uber that are seeing their share price continuously dropping since the beginning of this crisis. But what some onlookers do not realize is that, due to their business model, Uber is not really losing money. They might not make revenue but 80% of their cost is truly the cost of the vehicle owners. The other 20% is mainly drawn from corporate overheads and maintains their online infrastructures; which I believe, will be able to manage with the income already generated through the business. Better still, in countries such as South Africa for instance, they continue to cautiously operate as essential service providers, under specific circumstances, and on a reduced scale.
This crisis has forced a lot of companies to adopt a WFH (Work From Home) approach in order to keep business activities running. At this moment, companies like Zoom (Video conferencing) and Cloud Computing companies, are seeing their share prices rise as the days go by. Corporations can be operated seamlessly with committed employees working together via these technologies, as long as they don't actually break their computers. 😅
In the end, the Coronavirus has, in many ways, revealed the limitations that most nations have in supplying their own markets. Countries are realizing that they are truly on their own, when biding for anything from masks to sanitizers or from servers to routers or computers, as access to these items becomes more and more challenging. This has also led to the so-called "China + n" trend where businesses are looking at other places for manufacturing and supplying their demands. Although the trend has been ongoing way before this crisis, due to the trade war between the USA and China, it is now more than ever becoming relevant. In the near future, it will be prudent for governments to look at how they can diversify suppliers and how they can produce locally, grow from within and try to be less dependant on other countries, in case a crisis like this happens again.