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Schneider Electric reopens China factories closed due to coronavirus

Written by Wed 26 Feb 2020

Schneider Electric said China supply chain shortages recovering after initial setback

Electrical equipment and data centre infrastructure giant Schneider Electric has said the financial impact of coronavirus on its quarterly revenues could reach €300m after factory closures in China temporarily halted production.

The company was forced to shut down facilities in China in response to the outbreak, 80 percent of which have now reopened.

Chief executive Jean-Pascal Tricoire revealed the effects of the outbreak in an interview with the Financial Times.

Despite the closures causing an initial slump in production, the CEO said he expected the company to make up the losses by the end of the year.

“It seems to me that the figures we get [coming out of China] are more encouraging,” said Tricoire.

“So it’s too early to say, but it will impact the first quarter and it will impact the second quarter but we think we’re going to repair or catch up on the impact within the year.”

15 percent of Schneider’s revenue came from China in 2019, but it is unclear how many of the factories used by the company were affected.

The current outbreak of coronavirus disease (COVID-19) was first reported from Wuhan, China, on 31 January, and has since spread around the world. There have been over 80,000 confirmed cases of the virus and 2,700 fatalities.

There are growing fears that the tech economy could suffer due to the virus’s impact on global supply chains.

The data centre industry is somewhat shock-resistant to factory closures as components that make up the data centre supply chain are usually stockpiled. According to DataCenterDynamics, any shortfalls in manufacturing are expected to be covered until at least March.

But as the number of confirmed cases of the virus continues to surge, some of the world’s largest technology firms have seen a drop in stock prices this week. The stock of Dell Technologies, a global leader in data centre infrastructure, dropped by more than 7 percent Monday. Chipmaker Nvidia’s stock fell by 6 percent while AMD experienced a 7 percent drop.

Lenovo, another producer of data centre equipment which is based in China said in a statement that it is facing “short-term constraints and delays as the supply chain is ramped back up after the extended Chinese New Year factory closures.”

“As relates to coronavirus, the business priority continues to be ensuring the health and welfare of the Lenovo workforce, continuity of manufacturing and rebuilding capacity, and assisting those working to contain the outbreak,” the company said in a statement.

On Twitter, IDC researcher Linn Huang said the company is forecasting a “Yellow Light” scenario for supply chain recovery.

“Yellow light: Supply chain recovery is a multi-quarter affair and doesn’t kick into high gear until springtime. Market is balanced as we enter 2021. Unlike the green light, presumes worst is still ahead of us. This is our current forecast,” wrote Huang.

Chinese cloud giant Alibaba Cloud has offered $1,000 of cloud credits to organisations that have been affected by the virus.

“We are offering [businesses] tailored cloud solutions to address the challenges they are facing, including the necessary telecommunication systems to connect remotely,” the company wrote in an email to customers, according to CRN.

Written by Wed 26 Feb 2020

Tags:

China Coronavirus economy Schneider electric supply chain
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