The Ice Age of Consumer Electronics: Switch Faces Supply Cuts, Apple Lowers Revenue Forecast

Many industries have been in a difficult situation recently due to the epidemic, including the consumer electronics industry. Nintendo is facing a shortage of Switch in the European and American markets, and Apple's second fiscal quarter will also be lower than expected due to the epidemic.

Affected by various epidemic prevention and control measures and the delayed resumption of work by enterprises, the upstream supply chains of many electronic products have also been significantly disrupted and faced many complex problems.

Companies such as gaming giant Nintendo and mobile phone giant Apple have also been affected and are under considerable pressure under the epidemic.

Nintendo: Switch may be out of stock in the European and American markets

According to foreign media reports, due to the production bottleneck caused by the outbreak of the new coronavirus, Nintendo's Switch may be out of stock worldwide, and the company may find it difficult to provide sufficient supply for the US and European markets in April.

People familiar with the matter said that the current limited supply of parts from China has affected the output of Nintendo's assembly plant in Vietnam, which Nintendo mainly relies on to produce game consoles for the US market.

Therefore, after the existing inventory and current shipments are sold out, the shortage of components this month will affect subsequent Switch shipments.

In response, a Nintendo spokesperson said: "We currently do not see any significant impact on exports to the United States, but we will remain vigilant and take measures if necessary. If the virus spreads more widely and the outbreak is prolonged, supply may be affected."

Sources familiar with Nintendo's business say that as of now, there won't be any problems with the Switch arriving in the United States this month and in March because they are already being shipped from Asia.

However, shipments destined for this month or next, which are due to arrive in the U.S. in April, may have trouble getting there. “The shipments won’t stop completely, but they will be significantly reduced,” he said.

It is reported that the United States is Nintendo's largest market, accounting for 43% of its core business, while Europe accounts for 27% and Japan accounts for 21%. For Nintendo, if the supply of the US market is cut off, the losses caused may be considerable.

Despite this, Chinese suppliers that provide components to Nintendo do not want to resume production too early because they are worried that there may be people infected with the new coronavirus among the returning workers, which could lead to an outbreak in the factory.

Apple: Second quarter targets will not be achieved

On February 17 local time, Apple announced that due to the impact of the new coronavirus epidemic, which has led to a decrease in global iPhone supply and a decrease in demand in China, the company expects to fail to achieve its revenue target for this fiscal quarter (ending March).

In its latest release, it said:

The quarterly guidance we issued on January 28, 2020, reflected the best information available at the time and our best estimate of the pace of resumption of business after the Lunar New Year holiday ended on February 10. However, the pace of return to a normal pace has been slower than we expected. As a result, we do not expect to achieve the revenue guidance we previously provided for the March quarter due to two main factors.

The two main factors are: limited global iPhone supply and declining demand for Apple's products among Chinese users.

Previously, Apple predicted in its first quarter financial report released at the end of January that the company's second quarter revenue would reach US$63 billion to US$67 billion. This performance guidance range is slightly larger than the usual level.

Apple acknowledged at the time that the coronavirus situation created some uncertainty, but it now appears that the impact will be greater than Apple previously said.

Previously, for the sake of epidemic prevention and control, Apple announced on February 1 that it would temporarily close all its offline stores in mainland China, and it was expected to reopen on February 10.

However, under the current circumstances, 42 Apple stores in China remain closed, and some stores have begun limited business hours. The specific opening times of other stores will be notified separately.

Just after Apple officially released the above news on February 17, Apple CEO Tim Cook sent a memo to employees, further emphasizing the issue of the coronavirus.

Here is the full text of Cook's memo:

Team,

The response to COVID-19 has touched the lives of so many in the Apple family, and I want to thank everyone for their dedication, empathy, understanding, and care. Today, we more than doubled our donation to support the historic and global health response.

Our paramount concern is with the people who make up Apple's community of employees, partners, customers, and suppliers in China. I also want to recognize the many people across our teams who have been working around the clock to manage Apple's global COVID-19 response with diligence and thoughtfulness.

Corporate offices and contact centers have reopened across China, and our stores are starting to reopen, but we are experiencing a slower return to normal conditions than we had anticipated. This afternoon, I shared this update with our community of shareholders and investors to note that we do not expect to meet the revenue guidance we provided for the March quarter. Outside of China, customer demand across our product and service categories has been strong to date and in line with our expectations. Apple is fundamentally strong, and this disruption to our business is only temporary.

Our first priority – now and always – is the health and safety of our employees, supply chain partners, customers, and the communities in which we operate. Our profound gratitude is with those on the front lines of confronting this public health emergency.

Tim

He said in the memo that the company was working to resume normal operations, with offices and contact centers reopening across China and online stores starting to reopen, but store closures and subsequent limited operating hours had led to a significant reduction in customer traffic.

Apple said it is continuing to monitor the situation and will provide more information during its quarterly earnings call in April. In addition, the company said it will more than double its previously announced donation to help public health authorities fight the Wuhan coronavirus.

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