Asian SARS Epidemic Could Impact Supply Chain, Industry Travel

In only the past week or so, more than 1,600 people in Asia--including travelers from Western countries--have contracted SARS, a flulike disease. About 80 people have died, including several in Canada and Europe.

If the epidemic takes hold, it could force plant closures in areas of Asia where electronics manufacturing is concentrated, in turn disrupting the IT supply chain, according to The Aberdeen Group. The research firm said this week that the SARS outbreak is centered in key electronics production tracts in China, where investors from several countries--including Japan, Korea and Taiwan--have financed factories. In a worst-case scenario, a large part of China could be quarantined, triggering a scramble among electronics customers seeking alternative supplies, Aberdeen researchers said.

Over the past several days, Singapore's government quarantined 305 employees of a local Motorola plant at their homes when an assembly-line worker was found to be infected with SARS. As a precaution, Motorola asked more than 500 night-shift employees not to report to work.

An employee of one of Hewlett-Packard's two business offices in Hong Kong also was suspected to have contracted SARS, leading the company to send all of that office's staff home and then disinfect the office, an HP spokesperson told CRN. HP has provided face masks so employees can return to work at that office, but the vendor has encouraged staff to work from home as much as possible, he said.

Asian electronics manufacturers are worried about SARS but aren't panicking, said Sam Tsai, president of Elitegroup Computer Systems, a Fremont, Calif.-based motherboard maker with offices and factories in Taiwan and China. "They are concerned, especially in the assembly lines. Reports say that SARS is spread by contact. We have to protect the workers," he said.

If 5 percent to 10 percent of a factory's workforce becomes infected with SARS, it would have to shut down, Tsai said, noting that such a scenario doesn't seem to be an immediate threat at this point. "If the production line is automated, like for semiconductors, there is no effect from SARS," he said. "For other operations, such as motherboard factories, everyone wears a mask anyway to protect against dust."

At Tyan Computer, another Fremont-based motherboard maker with operations in Taiwan and China, a break in the supply chain is more likely than a large number of workers becoming infected with SARS, said Don Clegg, the company's vice president of sales and strategic marketing. "Some of my suppliers are in Singapore, so the SARS epidemic could affect my supply chain. But in the U.S., we have not talked about any what-if scenarios yet," Clegg said. "There's so much fear and uncertainty over what SARS is and how to treat it."

Still, industry observers say SARS' main impact on the IT market has been company restrictions on travel to, from and within Asia. The World Health Organization on Tuesday issued a travel advisory against all travel to Hong Kong and the southern Chinese province of Guangdong.

Sun Microsystems, for one, had planned to kick off its quarterly launch of products in Shanghai, China, next Tuesday with keynotes from several key executives, including Greg Papadopoulos, CTO; James Gosling, vice president and a fellow at Sun Labs; and Mark Tolliver, chief strategy officer and executive vice president of marketing and business development. However, the company this week postponed the event, issuing the following statement: "We reluctantly concluded that escalating health and travel advisories from various international authorities required us to take this action."

Citing "customers' concerns" about SARS, Intel also canceled its Intel Developer Forum events scheduled for April 13 to 15 in Taipei, Taiwan, and April 17 to 18 in Beijing, China. An Intel spokesperson said Intel CEO Craig Barrett, who was scheduled to deliver a keynote address at both events, also canceled his travel plans to Asia.

HP is following State Department recommendations and shutting down all travel to high-risk areas, including Vietnam, China, Singapore, Hong Kong and Taiwan, the company spokesperson said.

Elitegroup's Tsai said, "Last week, I announced to all employees in the U.S. that they should not go abroad. I told them that if they go abroad, when they get back they must stay at home for one week without pay. If they come back from a vacation which they started before the announcement, they still have to stay home for a week after returning, but with a 50 percent cut in pay for the week."

Tyan Computer has cut frequent-flying between Taipei, Beijing and Shanghai to practically nothing, said Clegg. "We have a cooling-off quarantine time if someone has to travel between the offices-- company rule, just as a precaution," he said. "But the offices are pretty much self-contained units, so there is not a lot of back-and-forth travel anyway."

Elitegroup has yet to see one of its employees contract SARS, but the company is taking no chances, Tsai said. He added that it's still too early to see how SARS will affect Asian business in the long run and whether Computex, the annual IT exhibition held in Taipei in early June, will be canceled.

"It depends on how well the SARS situation can be handled," Tsai said. "If SARS continues to grow, Computex could be canceled. Last week, an international bicycle exhibition held in Taipei took a big hit, as half the expected visitors and exhibitors canceled their trips."