It may be only the beginning of supply chain disruptions:
Apple shares fell over 3% in pre-market trade on Tuesday after it warned that it does not expect to meet its own guidance for the March quarter because of the impact from the coronavirus.
The outbreak of the virus, which has killed over 1,800 people, also led to China’s new year holiday being extended and factories and retail stores being shut for a longer period of time.
Apple said there was “a slower return to normal conditions than we had anticipated” pointing to issues around its supply and demand.
At some point it had to happen. When the world’s largest corporations combined the efficiency of worldwide JIT delivery with the affordability of Chinese slave labor, they created a single-point-of-failure situation that no one could have foreseen.
I mean, how likely was it that the world’s consumer goods factory would be shut down by an escaped bioweapon?
China is in a pinch. With many thousands more cases than it is admitting, and probably an order of magnitude more dead, it must keep 700+ million people in some sort of quarantine to slow the spread of Covid-19. On the other hand, it simply cannot do so. Without industry and export, communist paradise may quickly devolve into a bloody mess*. Like Macau’s casinos, China is re-opening for business. Without solving the issue that caused it to close in the first place.
The gamble will either pay off or it won’t. Win or lose, China must go all in. And it will take Apple, Ford, and anyone who relies on China with it.
If all goes back to normal, we may see a few temporary disruptions in iPhones and auto parts. And globalism rolls on.
If it doesn’t go back to normal, if the bet is a loser, then every supply line coming out of China, from pharmaceuticals to circuit boards may see significant, even permanent disruptions. One cannot simply start and stop foundries, smelters, and the millions of assembly lines that rely on them based on how many workers show up in a given day.
Depending how badly the bet fails, we may be witnessing the last hurrah of economic globalism. The model had to break at some point – efficiency is brittle. And if this is the Fourth Turning crisis starting to roll in earnest, then history is about to get real again. And quickly.
No man yet knows what road this crisis will take. On the other hand, we can know the end of where certain roads lead. The messy end of globalism, especially if it results in worldwide depression, would hurry the rise of nationalism worldwide, both in its good and bad** effects.
Be prepared.
* This is not unique to China. Shut down any modern nation for a month – no ports, no restaurants – and see what happens. Millions of Americans would not even know how to feed themselves without McDonalds and Hot Pockets.
** Everyone loves nationalism until Turkey nukes Greece.
“they created a single-point-of-failure situation that anyone could have foreseen”
FIFY 🙂
“The obscure we see eventually. The completely obvious, it seems takes longer.” — Edward R. Murrow
Touche’