Business In The Time Of Influenza

Some market sectors in electronics will fare well in a pandemic, others will not.


The current round of flu will have lasting repercussions on the electronics industry, whether it turns into the kind of pandemic that killed 50 million to 100 million people in the fall of 1918 or whether it proves to be a localized tragedy. We won’t know that for months, of course. The 1918 flu actually began as a relatively mild illness the previous spring before mutating into one of the worst disasters in modern times.


But no matter what happens with this disease, change will be accelerated. Some sectors will emerge stronger and other will suffer. Electronic medical records and the computers and storage needed to handle them will get a serious boost. Already targeted by the Obama administration as part of the economic stimulus plan, this also should provide needed momentum for at-home testing and electronics and a more robust short-range and long-range communications infrastructure.


Also likely to receive a boost are things like videoconferencing and collaborative work environments. Most people don’t want to get on planes if they don’t have to, and most companies don’t want to risk having their employees travel and possibly infect the rest of their office. That provides a huge impetus to invest in new technology. It can even provide a boost for virtual conferences and trade shows. Intel is experimenting with its own electronic trade show next month with its Embedded eVent.


Sales of more advanced phones with 3G capabilities for Internet access also tend to benefit at times when people need more information more quickly than they can get with a simple phone call. The Internet has become a part of life over the past 14 years, and fear can drive a quest for even more information.


At the same time, International trade can take a serious hit. In March 2003, the World Health Organization declared SARS a pandemic, although several months later the danger subsided. During that time, commerce with much of Asia—and even within Asia—slowed to a crawl. Dock workers were afraid to open containers arriving from countries infected with SARS and much of the Asia economy simply stopped for two months.


The effect of that illness proved something of a wakeup call for contract manufacturers, who realized that having all their plants in one country wasn’t such a good idea. It led to significant manufacturing expansion in places like Eastern Europe and—something that should be noteworthy in this time of swine/bird/human flu—Mexico.


Manufacturing is far less rooted these days than in the past, and many major manufacturers are now hedged against disaster with facilities in multiple countries. But what’s different is they don’t control their supply chain the way Henry Ford once did. Any glitch in the production of key products, such as semiconductor wafers, can have a significant impact on much more than just the price of wafers. It can raise the price of electronics across the board, which has a compounding effect up the electronics hierarchy and into the economy at large.


Likewise, in markets where there is strong competition, a flu epidemic can create a huge disadvantage to one company vs. another if it affects either their supply chain or manufacturing capability.

What do you think will happen?


–Ed Sperling



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