Apple's coronavirus warning foreshadows broader threat for tech
A warning from Apple on Monday that it would not meet its quarterly earnings forecast shows how quickly the coronavirus is creating real problems for the tech industry.
Why it matters: The virus is still in what could be the early stages and is already stressing supply chains and causing conference cancellations.
Driving the news:
- Apple warned Monday that the virus is limiting iPhone production and hurting demand within China for all of its products. The company said revenue would be less than its prior forecast, but declined to offer a new prediction.
- Nvidia cut its quarterly revenue forecast by $100 million, citing the impact of the virus.
Between the lines: Apple may be unique among U.S. tech companies in also counting on China for a large chunk of sales, but the slowdown in production is likely to be felt by a wide swath of the industry, which relies heavily on China for production. Apple and other firms had already said this quarter would be hard to predict given uncertainties resulting from the virus.
Threat level: It's still too soon to forecast how large the impact will be, but there are lots of reasons to imagine it will be significant, even assuming the outbreak doesn't get worse. China has one of the biggest economies in the world and is responsible for even more of the world's tech production.
- As Apple said in its statement and the Financial Times reported last week, even as Chinese manufacturers are returning to work, they are doing so in a phased manner.
- Startups and smaller hardware makers could be hurt worse, as larger companies will get priority in a capacity crunch at contract manufacturers.
What they're saying: Lots of experts predicted more companies will be forced to lower short-term financial forecasts due to the virus.
- "Apple is the first but won't be the last company to pre-announce they'll miss their quarterly numbers," tech industry veteran Dare Obasanjo said in a tweet. "Pure software companies may avoid impact via remote work but any manufacturing or retail dependent on China will take a hit."
- However, longtime industry watchers also predicted that the virus may also become an easy scapegoat for companies with other business shortcomings.
Meanwhile: Concerns about the spread of the virus are having a big impact on industry gatherings around the globe.
- IBM, for example, has pulled out of next week's RSA. And that's a conference where 82% of attendees and exhibiting companies are from the U.S., where only a small number of people have been infected.
- Facebook canceled a 4,000-person marketing conference set to take place next month in San Francisco.
- There were reportedly plenty of empty seats at an influential AI conference last week, as many Chinese researchers were unable to attend.
- And, of course, organizers had to cancel the giant Mobile World Congress after a number of key participants withdrew from the Barcelona event, originally scheduled to begin Feb. 24.