The electronics industry braced for yet another economic blow as the spread of a highly contagious respiratory virus forced some manufacturers to close offices, cut travel, and cancel planned product introductions and technical conferences.

As the severe acute respiratory syndrome (SARS) virus continued its unnerving spread from Asia to the Western Hemisphere, analysts predicted it could drive some Asian economies into recession and, worst case, send the global electronics industry into "nuclear winter."

The closings and cancellations began after the World Health Organization recommended last week that travelers postpone nonessential trips to southern China to stem the spread of SARS. The pneumonia-like virus, which has infected more than 1,800 people in Pacific Rim countries, is believed responsible for more than 60 deaths worldwide.

The latest cancellation came Monday (April 7) when a TD-SCDMA conference in Beijing was rescheduled for May.

The disease is emerging as a particularly vexing problem for the electronics industry, much of which has manufacturing and business facilities in Asian countries and territories, including China, Taiwan, Singapore, Hong Kong, Vietnam and other regions that have reported SARS cases.

"There's no doubt that it could have a serious effect on the electronics industry there," said Chris Lanfear, an analyst for Venture Development Corp. (Natick, Mass.). "Manufacturing environments in some of those countries are perfect for the virus to pass from individual to individual."

In a report, Morgan Stanley cut its 2003 gross domestic product forecast for the Asia-Pacific region from 5.1 percent to 4.5 percent to account for the impact of SARS. The company also said that if the outbreak lasts two more months, a number of Asian economies will slip into recession.

Boston-based Aberdeen Group, an electronics industry analysis firm, warned last week that OEMs must be ready with backup sources of semiconductors if SARS continues to spread. The firm also said that component suppliers must be prepared with shipping alternatives if airlines cut flights out of Asia. "The industry needs to start scratching its head over contingency plans," said Russ Craig, research director of the Aberdeen Group.

Analysts described the electronics industry as in a cautionary stage right now, but they cited legitimate reasons for greater concern, especially if the disease grows into an epidemic that results in a Chinese quarantine. If that happened, "It would take literally months of 24/7 work by manufacturing planners and logistics mavens to create qualified alternate production sources," the Aberdeen Group report said. "That would mean nuclear winter to the semiconductor and electronics industry."

As the disease spread over the past two weeks, the list of closings and cancellations mushroomed. Intel Corp. last week canceled two of its regional Intel Developer Forums-in Taipei, Taiwan, on April 13-15, and in Beijing on April 17-18.

"As we began to get more inquiries, it became clear that attendance was going to drop off," an Intel spokesman said. "Even among those who were still coming, many were uncomfortable." Each forums normally draws about 1,000, the spokesman said. But the company did not cancel upcoming forums in Tokyo (April 9-11) and Bangalore, India (April 22-23).

Intel and Hewlett-Packard also closed Hong Kong offices in recent days after employees apparently contracted the SARS virus. Hewlett-Packard Co. sent a third of its 900 Hong Kong workers home on March 28, after one worker was suspected of having come down with SARS. Intel, which has a three-floor sales and marketing facility in Hong Kong, sent home all of the workers on one of those floors after an employee exhibited symptoms.

Similarly, Motorola Inc. said in a statement that an employee in Singapore had been infected with the virus. The company subsequently told 532 employees who work in the same area not to report to work for one night.

Sun Microsystems Inc., meanwhile, said it was canceling a huge product launch- which had been scheduled for April 7 in Shanghai-of servers, software and storage systems.

Intel, HP, Microsoft, Cirrus Logic, Molex and numerous other companies with an Asian presence have issued similar warnings. "We have not put in place any formal policy that restricts travel," said a spokesman for Cirrus Logic Inc. "But we have encouraged employees to use good judgment and consider travel very carefully."

Microsoft Corp. is among many companies with Asian operations that are encouraging employees, especially those in sales and marketing, to work from home. "Microsoft is a very e-mail-centric company anyway, so it doesn't represent a major difference in their work days," a spokesman said.

By: DocMemory
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