Covid-19 Epidemic Hampers Delivery of Parts to Many Brazilian Industries

RIO DE JANEIRO, BRAZIL – Covid-19, the coronavirus epidemic that broke out in China, the world’s largest exporter of parts, components and finished products, which in recent weeks has rocked the financial markets, has also triggered a warning signal among Brazilian industries, particularly electronics, which use many items imported from Asia.

Multilaser, a company that manufactures electronics in Extrema (MG), projects a 17 percent reduction in the supply of imported parts and components due to the almost one-month long shutdown of Chinese factories.

“This is the expected loss so far because of what has already occurred,” said Alexandre Ostrowiecki, CEO. However, he pointed out that the picture could worsen if Chinese production is not quickly resumed.

The company produces approximately 3.500 different electronic goods, among them cell phones, tablets, keyboards and mouses, for instance. Currently, 80 percent of its suppliers that are in the Asian country have not resumed activities. The Brazilian manufacturer currently has approximately 450 suppliers in the region, which serve several brands and employ 500,000 workers.

“Multilaser is completely in the eye of the coronavirus hurricane,” said Ostrowiecki. However, he explained that the company operates with six months’ stock and that the influx of products into stores is not expected to be impacted before April.

“How serious this will be depends on how the disease develops,” he said. There is no estimate for activities to normalize in China. The brand runs its own operation with 70 test engineering employees in the country, now running at a slower pace.

Collective vacation

At the end of the month, the Metalworkers Union of Jaguariúna (SP) received a collective vacation notice for Flextronics employees, in charge of Motorola cell phone production. According to the organization, the stoppage should affect 80 percent of the plant.

The company explains the stoppage due to the health crisis that affects China, as it relies on supplies imported from that country to manufacture its products in Brazil.

“It is enough to lack just one component for the production line to stop,” said José Jorge do Nascimento, president of Eletros, an association that includes electronics manufacturers.

Regarding TVs, for instance, components imported from China represent 60 percent of the total parts. In other lines, such as electroportables, this slice varies between 30 and 50 percent, depending on the product.

Concerned with the lack of supplies, manufacturers met at Eletros last week. Nascimento said that the executives did not disclose the level of supply stocks in their plants because it is strategic information.

However, the president of Eletros said that the volumes of higher-value components, such as semiconductors – which are flown in – were last Thursday enough to handle the supply of, at most, ten days of production – the average is 15 days.

According to market sources, the risk of shortage of supplies is greater for cell phone and computer manufacturers who work with shorter component stocks. But it is also a threat to the automotive industry, which uses a great amount of embedded electronics.

Faced with the risk of a supply shortfall, the president of Eletros recalled that the industry has few alternatives to sustain its production pace because it is very difficult to switch suppliers overnight. He explained that the components have to comply with a quality standard.

“If the situation fails to normalize soon, there may be a shortage of supplies for the production of electronics for Mother’s Day,” said Nascimento. This date in May is so critical to retail sales that it is known as the “Christmas of the first semester”. The products will start being manufactured next month.

(Source: Infomoney)