The Dow Jones fell 3.6%, with Apple, Alphabet, Facebook and Cisco each dropping more than 4%. Two Santa Clara chipmakers, Nvidia and Advanced Micro Devices, plunged more than 7% on Monday.
Willy Shih, a management expert at Harvard Business School, said the coronavirus outbreak is showing the world what happens when the world’s second-largest economy is shut down.
“This is a mess,” Shih said.
Chipmakers are particularly caught up in the turmoil.
“Chipmakers were hit the hardest because they have the biggest overall business exposure,” Patrick Moorhead, president and principal analyst at Moor Insights and Strategy, said in an email. “Most electronics and technology products and even sub-assemblies are made in China, and if those manufacturers aren’t working, then chips aren’t being used, which leads to lower revenue.”
But the malaise is hitting across the tech sector.
Peter Leroe-Muñoz, vice president of technology & innovation policy at the Silicon Valley Leadership Group, said members like Apple have been hit twice — once by a disruption in global supply chains, and again from lost sales from the massive Chinese market, with parts of the country under lockdown amid empty roads and closed stores.
Beyond production, tech also relies heavily on conferences that bring scores of companies together each year. But flight restrictions have reduced business travel, and some companies have pulled out of conferences — including some in San Francisco — as concerns about the virus swell.
At the RSA Conference, a major digital security convention in the city’s Moscone Center that opened Monday, some key players were missing: IBM, AT&T Cybersecurity and Verizon all pulled out over coronavirus fears. Signs urged attendees to take precautions over health — like handwashing and not touching their nose or mouth — though the coronavirus was not specifically mentioned. Few attendees wore masks.
“I’m afraid it’s just a matter of time before the virus will spread,” said Eric Kang, a Minnesota-based vice president at Swiss digital security firm Secude. He said that while he traveled to San Francisco for RSA, he will be canceling other engagements in Las Vegas; Washington, D.C.; and elsewhere because of the virus.
“I just don’t want to take unnecessary risks,” he said.
San Francisco Mayor London Breed wrote a letter encouraging participants to attend the conference. The risk is low “as the virus is not circulating in our community,” she wrote.
Other conferences have also felt the impact. Facebook canceled its Global Marketing Summit that was scheduled in San Francisco next month. Kojima Productions, a Japanese company, announced Monday that it will not participate in the 2020 Game Developers Conference in San Francisco in March; Facebook and PlayStation made similar announcements earlier.
Leroe-Muñoz said limited travel and canceled conferences hurt research and development.
“It makes it more difficult to fund and ultimately build and innovate in a way that products and services will later be taken to the market,” he said. “There is going to be a little bit of a lag in innovation that we’re going to see down the line. The longer this virus persists and is not contained will lead to greater uncertainty, and uncertainty is always a drag on business and innovation.”
In China, factories as long as multiple city blocks hold up to 20,000 workers who stand shoulder to shoulder on supply lines assembling small electronics and live with up to a dozen people in one room, Shih said.
A factory has to go through government inspections to reopen, and some workers, especially those from Wuhan and the rest of Hubei province, where the virus originated, can’t travel to get back to their jobs, making it harder to restart, according to Stanford Graduate School of Business Professor Hau Lee.
Shih said that higher-value products like iPhones or semiconductors come in the air cargo bellies of passenger planes from China — all of which have been canceled from San Francisco International Airport through the end of April. SFO spokesman Doug Yakel said information on cargo numbers from the airline cancellations in February will not be available until next month.
“It’s a slow-motion train wreck,” Shih said, adding: “All of a sudden, this is a huge disruption to trade. We’re going to have some time lags.”
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