ASSESSMENTS

The Coronavirus Spreads Fears of a Shutdown in China's Tech Sector

Feb 7, 2020 | 10:00 GMT

An employee sits in the showroom of an Apple store in Beijing after it closed for the day on Feb. 1, 2020.

An employee sits in the showroom of an Apple store in Beijing after it closed for the day on Feb. 1. So far, China's technology industry has been spared the worst of the new coronavirus outbreak, but that could quickly change.

(KEVIN FRAYER/Getty Images)

Highlights

  • At present, the new coronavirus will not have a huge effect on China's technology sector beyond the temporary extension of the Lunar New Year holiday, since Wuhan and Hubei province are not a critical node in the country's overall technology sector.
  • Nevertheless, the virus will have an impact on Wuhan's fiber optics industry, which is among the world's largest and accounts for a fifth of China's capacity in the sector.
  • A lengthy crisis in Wuhan could also delay China's gradual attempts to improve its 3D NAND memory chip manufacturing capabilities as the city is a focal point of domestic investment in the area.
  • If authorities fail to contain the outbreak to Wuhan and it starts to impact neighboring provinces like Shaanxi and Henan, or Yangtze River Basin areas like Shanghai, Jiangsu and Zhejiang, the impact could be devastating.

Without question, the new coronavirus has taken a toll on China and many other places in the world, infecting at least 30,600 people and killing 633 as of Feb. 7. But only now, as the Lunar New Year holiday draws to a close, is Beijing preparing to assess just how much economic damage the coronavirus outbreak has wrought, especially as China is central to the global electronics and information technology sector. Ultimately, the breadth of the impact depends on how far the virus spreads beyond its current location. Hubei province and its capital, Wuhan, are not critical nodes for the vast majority of China's electronics sector. But neighboring provinces, including Shaanxi, Henan and Jiangxi, are home to cities that are prominent in the global technology sector, while the provinces with the second and third most confirmed cases so far, Zhejiang and Guangdong, are arguably China's two most critical areas for tech....

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