The COVID-19 pandemic didn’t hit every factory in China at once.
The initial impact to China’s electronics industry arrived around the time the nation was celebrating its new year. Two weeks after announcing 59 known cases of a new form of coronavirus, the national government put Wuhan — a city of 11 million — under strict lockdown.
As with most of the rest of the word, the manufacturing sector was caught somewhat flat-footed. according to Anker founder and CEO Steven Yang.
“Nobody had a great reaction,” said Yang, whose electronics company is based in Shenzhen. “I think this all caught us by surprise. In our China office, everybody was prepared to go on vacation for the Chinese New Year. I think the first reaction was that vacation was prolonged the first week and then another several days.
People were just off work. There wasn’t a determined date for when they could come back to work. That period was the most concerning because we didn’t have an outlook. They had to find certainties. People had to work from home and contact supplies and so forth. That first three to four weeks was the most chaotic.”
Numbers from early 2020 certainly reflect the accompanying slowdown in the manufacturing sector. In February, the Purchasing Manager’s Index (PMI) — a metric used to gauge the health of manufacturing and service sectors — hit a record low.
These bottlenecks resulted in product shortages — a fact that was rendered relatively moot in some sectors as demand for nonessentials dropped, many small businesses shuttered and COVID-19-related layoffs began. The U.S. lost 20.5 million jobs in April alone, hitting a record high 14.7% unemployment. (When you suddenly find yourself indefinitely unemployed, a smartphone upgrade seems much less pressing.) Such events only served to compound existing mobile trends and has delayed the adoption of 5G and other technologies.
It seems likely, too, that COVID-19 will accelerate other trends within manufacturing — notably, the shift toward diversifying manufacturing sites. China continues to be the dominant global force in electronics manufacturing, but the price of labor and political uncertainty has led many companies to begin looking beyond the world’s largest workforce.
Many are considering manufacturing in areas like Southeast Asia and India. Vietnam, in particular, has offered an appealing proposition for a labor pool, notes Ho Chi Minh City-based Sonny Vu, CEO of carbon-fiber products manufacturer Arevo and founder of deep tech VC fund Alabaster.
“We’re friendly [with] the Americans and the West in general. Vietnam, they’ve got 100 million people, they can make stuff,” Vu explains. “The supply chains are getting more and more sophisticated. One of the issues has been that the subpar supply chain … it’s not as deep and broad as as other places like China. That’s changing really fast and people are willing to do manufacturing. I’ve heard from my friends trying to make stuff in China, labor’s always this chronic issue.”
Vietnam certainly can’t compete with China in terms of size (its labor force is around 7% the size of China’s), nor does it have the same manufacturing infrastructure. But the county’s appeal has only increased as hardware makers look to wean themselves off the reliance on a single country for their manufacturing needs. The fact that Vietnam has only reported 35 deaths from COVID-19 as of this writing is certainly a major point in the country’s favor.
Robotics and automation have also seen a dramatic uptick in interest among investors over the past five months. It’s clear that many companies are ready to make the move to a workforce that doesn’t transmit diseases and never calls in sick.
“People are realizing that having a physical proxy for themselves, to be able to be present remotely, might be more important than they imagined before,” explains Boston Dynamics CEO Rob Playter. “We’ve always thought of robots as being able to go into dangerous places. But now, danger has been redefined a little bit because of COVID. And so I think it’s opened up people’s imaginations about the applications of this kind of technology.
COVID-19 is set to dramatically accelerate adoption of robotics in countless industries, including logistics and food service. Manufacturing is certainly not immune.
“China is the largest user of robots in the world,” says Vu. “I think more and more robots and more and more automation around the world is one trend. Slave labor can’t compete with with robots, at the end of the day.”
Hardware makers themselves have learned to adapt to working across distances, notes Chrysalis Cloud’s Kate Whitcomb. “The pandemic has accelerated the pace at which hardware startups are developing products, because we’re learning that you don’t need to get on an airplane and fly to Shenzhen in order to pick up the parts that you want to build something with. That’s a huge game changer. And I think it’s going to change how startups feel about going to different locations to build a product.”
Y Combinator’s Eric Migicovsky says it is easier than ever to get the ball rolling on manufacturing without leaving your work bench.
“The easiest thing to do is to go onto a website, like AliExpress, which is kind of like an Amazon front end for all of the factories that build stuff in China. And to find something that is similar to what you want to make close enough that you could remix it, either by adding your own software in or maybe taping two things to together to make a new product,” said Migicovsky.
“And then after you’ve been able to sufficiently hack it together using completely off-the-shelf components, the next step is to reach out to one of those factories, it’s as easy as finding their WeChat ID and sending them a WeChat message or an email or a Skype message and talking to the factory and proposing your new evolution of their product. Most of the factories are extremely receptive to people who want to build kind of new versions of a product that they’ve already made before.”