SARS Impacts IT Chain

In the past few weeks, more than 2,300 people living and traveling in Asia have contracted SARS, a disease with flu-like symptoms. So far, more than 70 people worldwide have died.

Market-research firm The Aberdeen Group said SARS could disrupt the IT supply chain if the epidemic takes hold and forces the closure of plants in China or in other parts of Asia with concentrations of electronics manufacturing facilities.

In a worst-case scenario, Aberdeen researchers said, a large part of China could be quarantined, leaving customers scrambling to secure alternative supplies. Of more immediate concern to the IT industry, however, is the disruption of air travel, which already has begun as a result of SARS.

Early last week, Singapore's government quarantined 305 Motorola employees in their homes after an assembly-line worker was found to be infected with SARS. As a precaution, Motorola closed its entire third shift of operations. Meanwhile, Hewlett-Packard and Intel closed offices in Hong Kong after some employees exhibited symptoms of SARS.

Asian manufacturers are worried but not panicking, said Sam Tsai, president of Elitegroup Computer Systems, a Fremont, Calif.-based motherboard maker with operations in Taiwan and China.

If 5 percent to 10 percent of a factory's workforce becomes infected with SARS, the facility 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 haven't 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."

SARS' main impact on the IT market so far has been on business travel to, from and within Asia. The World Health Organization last week issued an advisory against all travel to Hong Kong and southern China.

Sun Microsystems and Intel canceled scheduled events in China and Taiwan and curtailed executive travel to the region, including that of Intel CEO Craig Barrett.

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

The channel is already starting to feel the effect. An Ingram Micro spokesperson said the distributor has temporarily restricted all non-essential travel to those countries. The company is also advising its employees about the symptoms of SARS and what to do if they feel they have contracted the disease.

Paul Su, president of AOpen America, San Jose, Calif., said his company was sponsoring training last week for channel executives involved in customer service, but 10 percent of the attendees canceled because of SARS fears, even though the executives were flying within North America and South America.

The cancellations were a direct result of the scare prompted by the landing in San Jose of an American Airlines plane from Tokyo. Four passengers on the flight exhibited symptoms of SARS but later were examined and cleared of having the illness, Su said. "We have a lot of people flying here from Asia," he said.

Meanwhile, Elitegroup has not had any employees contract SARS, but the company is taking no chances, Tsai said. He added that it's still too early to tell 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.