Weekly Update: Global Coronavirus Impact and Implications

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Coronavirus (COVID-19) – Update Week 14, 2020

The novel coronavirus continues to wreak havoc on daily life around the world, and in an increasing number of countries; 180 have now reported cases. In the past seven days the total number of confirmed cases has doubled again and is still accelerating – with new cases increasing by around 20% per day (75,000 between March 31st and April 1st).

But physical distancing and lockdowns do bring results – Italy’s number of new cases on April 1st was almost the same as the previous day – indicating that it is nearing the top of the new case growth curve and should see a decline in the days to come. However more worrying were spikes in new cases in Spain and France, both countries that had previously seen slowing growth. However, the data is noisy, and a slowing trend is seen in most markets that have been rigorously enforcing lockdowns and physical distancing measures.

Last week we said the US was, ‘almost certain to overtake all other countries..’, it didn’t take long. The US now has a massively higher number of cases than all other countries – almost twice as many as Italy. We indicated our concern about the US when we started keeping this weekly update and this has now been borne out. The fast growth in newly reported cases is partly a function of greatly increased testing, which is now uncovering the extent of the infection. Despite the sharp rise in cases, March manufacturing data from the US was more resilient than feared. But new jobless data shows a massive rise in new claims 6.64 million compared to an expected 4.88 million. That the new number is so much worse than even the most pessimistic forecast highlights that the full extent of the impact remains unclear.

Coronavirus COVID-19 Global Cases by John Hopkins University (JHU)
Source: Center for Systems Science and Engineering (CSSE) at Johns Hopkins University (JHU)

However, while many states in the USA have implemented lock downs, there is still a stark contrast in indicators of activity. For example, two snapshots taken at the same time and at the same scale, from FlightRadar24, show the level of air traffic over the US compared to that over Europe. Pre-COVID you would see comparable levels of air traffic, though the US has always been somewhat higher. But in the midst of the current crisis, we are surprised at the continued level of passenger air traffic in US airspace. While the one over Europe is early evening and that of the US is around 2pm EDT, there is clearly more traffic over the US. Inspection of the flights does show a high proportion of cargo, but many are still passenger flights. By contrast, around 80% of the flights over Western Europe are cargo flights. On April 1st, the Trump administration said it was considering isolating hotspots from flight traffic, but has not yet imposed such as restriction. That said, data shows the number of passengers in the US is dramatically lower. So while many aircraft continue to fly, most are almost empty.

FlightRadar24 – images taken on March 31st at around 2pm EDT. (2)

FlightRadar24 – images taken on March 31st at around 2pm EDT. (1)
Source: FlightRadar24 – images taken on March 31st at around 2pm EDT

Income and Infection – strongly linked

New York City accounts for almost half the cases in the US. Data released by the city by zip code indicates a strong correlation between median income levels and the number of cases. This is unsurprising as the localities with the lowest incomes see the most overcrowded living conditions, where people have the greatest difficulty in self-isolating. This also gives us concern about fast growing and emerging markets that exhibit similar living conditions.

The Dharavi area of Mumbai is home to around a million people living in extremely high population density, in make-shift housing. The first coronavirus casualty was reported overnight. It is reasonable to expect the number of cases in the area to multiply rapidly. The Indian authorities are enforcing the largest lockdown globally. While official cases remain relatively low in the country, the lack of testing means that real number of cases is likely far higher. We continue to monitor the situation in India with concern as it is now the second largest smartphone market globally and still growing – unlike China and the US. A deep and sustained impact from corona virus will have a profound impact on the global smartphone market.

Indonesia is the world’s fourth most populous country. It has also seen an uptick in infections. While again the official number is low, we also think community infection is likely occurring unseen due to the lack of testing and preparedness. Expect the case rate to move sharply higher in the coming days and weeks.

Brazil has seen a sharp rise in cases. President Bolsonaro has been dismissive of the threat posed by the disease and has been urging Brazilians to return to work. However, most of Brazil’s state governors are defying the government and requiring people to self-distance and remain home. Nevertheless, it is likely that community transmission is underway in Brazil and cases will grow exponentially.

Daily new cases by continent show how the virus has spread East to West. Asia is not out of the danger zone yet.
Daily new cases by continent show how the virus has spread East to West. Asia is not out of the danger zone yet.

Economic Impacts

The International Monetary Fund declared that the world had officially entered a global recession. Given the scale of reductions in economic activity across multiple sectors, this is not surprising.

Forecasts are being updated as the situation unfolds. Currently, most economists are expecting a contraction in economic growth of around 2% y/y in 2020, which represents a downside swing of some 4.5 percentage points over previous forecasts.

Change in GDP Growth Due to COVID-19 in Selected Countries
Source: Economist Intelligence Unit

Smartphone Market Impact

We have modelled the most likely impact on the smartphone market based on the mix of factors we have seen so far, and expect to see over the next few months. We have looked at parallels from recent recessions to help guide our thinking. Our conclusion is that we expect to see a sharp contraction as consumers withhold making discretionary purchases during periods of maximum uncertainty. The result is an extension in the replacement cycle. However we expect that extension will be limited to no more than six months. We further expect that the long run average market growth rate will not vary significantly – but the near term growth rates will reflect the slow down and then rebound — a similar pattern to that seen in recent recessions but allowing for the different level of market maturity.

Other Sectors

Automotive remains hard hit. Most production facilities across Europe and North America remain closed. It’s a similar story in India. During the recession in 2008/9 the governments in the US and Europe implemented scrappage schemes to encourage consumers to replace older vehicles and inject spending into the auto sector. Given the strict new emission norms being implemented in Europe, governments in the region are likely considering the potential to gain benefits from newer lower emission vehicles that will go some way to addressing air pollution, while also pushing money into the hard hit auto sector. We are therefore expecting the return of scrappage schemes, perhaps with escalating rebates for the most fuel efficient cars such as full electric.

Subscribing clients can request more detail of our forecasts across a number of sectors including smartphones, IoT, automotive and more.

Coronavirus (COVID-19) – Update Week 13, 2020

A week is a long time in politics, and also in this coronavirus outbreak. In the past seven days, the number of confirmed cases has risen by 255,000 and still accelerating – currently by around 50,000 cases per day.

Source: Center for Systems Science and Engineering (CSSE) at Johns Hopkins University (JHU)

China still has the most cases, but Italy is fast catching up. Italy and Spain have recorded more deaths than China.

Statisticians have observed that the coronavirus outbreak precisely follows mathematical models and it is these that are informing government behaviours once an initial period of denial is overcome. The stages are clear and follow a consistent pattern. This from a former colleague, Dr Timo Partanen:

  1. Discovery phase – the virus has been present for days or weeks, spreading within a population but largely unnoticed because testing has not taken place. Testing starts to happen but is lagging behind. The daily growth rate of cases is very high.
  2. Exponential growth phase – the unrestricted spread of the disease is about 25% per day. This can be observed when the virus is spreading freely in a community without any social distancing measures, but testing is comprehensive enough so that significant numbers of new cases are recorded. Italy stayed in this stage for around the first 12 days of March.
  3. Declining growth phase – When social distancing is established, the growth rate starts to decline in a somewhat predictable pattern. How long and how quickly it declines varies by country based on the measures taken. This has happened in Italy for more than a week; yesterday’s growth rate, 7.5%, was again lower than the previous day. Spain, at 18% is behind Italy but growth rates are starting to slow. France 13%, Germany 13% are below the unconstrained growth rate. The UK, at 18%, is still high, but social distancing measures have only just been rigorously applied. The next two weeks should show a declining rate of growth in the UK.

What about Korea and Japan?

Both countries followed a different pattern, because their strategies were to test and track the epidemic intensively. They didn’t get a long period of 25% daily growth, because they followed every case and isolated all contacts. That cut the “natural growth” towards 10% a day.

And where is the USA?

As a whole it is still in the discovery phase and the numbers are distorted by the lack of tests. Some states have applied tough measures – such as California. But at the country level the growth rate in cases in the last 24 hours was almost exactly 25%. It is still not under control and there is no clear indication of how widely the virus has spread already. For example, in New York testing was expanded properly only last week and it is now undertaking more than 15k tests per day, and is finding 5k cases per day. The federal government is unwilling to impose the most stringent levels of control for fear of impacting the economy more deeply. This will likely mean a longer period of unconstrained growth in cases, unless almost all individual states apply the lockdown in a coordinated fashion. But it is the federal government that controls air traffic, for example.

It is almost certain that the US will overtake all other countries, including China, with the highest total number of cases.

Anomalies in the numbers

Iran is likely far, far worse than official statistics imply. Iran has not imposed a lockdown, so we expect there to be an almost unconstrained spread of the virus among the population. But with little testing and a government that rigorously controls communication, we may never know the true extent.

Russia too is likely to be experiencing a worse outbreak than official numbers suggest. It has established special facilities to deal with the outbreak, but is not reporting its cases freely.

India – the official number of infected is low. But while it is growing relatively quickly (20% in the last 24 hours) the government has moved fast to implement draconian lockdown measures that should slow the spread even if the real level of infection is much higher. The problem for many places in India is that social distancing, in some of the most densely populated areas, will be difficult to sustain for long. India has implemented the fiercest measures of any country. It will be a test case of how to bring the outbreak under control across a vast and populous country.

Counterpoint Covid Weekly Update: Air Traffic
Air traffic over India March 26th. Almost all flights visible are overflying. Source: FlightRadar24

Impact on the Global Economy

There is a high probability of a global recession occurring in Q2 and Q3 of 2020. Sectors most obviously impacted include travel and tourism, hospitality and entertainment; people are not travelling, eating out or going to the cinema. These sectors employ millions globally and have come to an almost complete stop in many countries.

The stark economic indicators seen in China in February are now being replicated in many other countries, even while China gets back on track.

The disruption to international travel is hurting trade already. Over half of global air freight is carried on passenger aircraft. The image below from FlightRadar24 looks similar to last week’s. But an examination of the aircraft criss-crossing the Atlantic shows that around half are cargo planes. The American Association of Port Authorities, an alliance of ports of the US, Canada, Caribbean and Latin America has warned that cargo volumes during the first quarter are likely to be down 20% y/y. Jobless rates in the US are surging, applications for income support in the UK have jumped.

Counterpoint Covid update: Reduced air traffic over the Atlantic
Reduced air traffic over the Atlantic and half of it freight, March 26th. Source FlightRadar24

Governments are acting fast though. The experience of the financial crisis of 2008/9 showed that decisive action helped address the damaging levels of uncertainty. Central banks in Europe, US and in other countries have prepared stimulus packages of staggering magnitude. Yesterday, the US Senate approved a package totalling around $2trn (9% of GDP). The total extra fiscal stimulus announced so far amounts to more than 2% of global GDP – far more than was applied in the wake of the 2008/9 financial crisis.

The stimulus and support packages may help. But consumer uncertainty tends to lead to withholding spending in times of trouble, only returning to previous levels once confidence returns.

Developed countries are fortunate in being sufficiently wealthy that they can afford to support the economy and workers for an extended period. In addition, healthcare systems are well-developed. Poorer countries have a higher proportion of casual workers and patchy healthcare, so the impacts will likely be, proportionally, greater.

Impact on Smartphones and Technology

We have developed new forecasts that are available for subscribing clients. These show a sharp fall in demand, moving in a wave across from China to the west, consistent with the viral spread. Under lockdowns, almost all offline retail activity ceases, though online continues to function.

The smartphone market is resilient; smartphones are perceived by consumers as essential. However, aside from replacing a broken phone, the purchase is usually discretionary and can therefore be delayed, effectively extending the replacement rate. The resulting contraction in the market will likely be short term in nature, we expect it to recover relatively quickly once the worst of the outbreak passes.

Homeworking and social distancing are underscoring how important technology is to keep people connected and entertained. While we see the Coronavirus pandemic as a sharp, short-term negative, we continue to believe the long term impact on the market will be marginal.

Counterpoint will be hosting a webinar to talk through the likely impacts as we see them. Click here to register

Coronavirus (COVID-19) – Update Week 12, 2020

While the pandemic escalates in the west and increasingly wreaks havoc on daily life, China and South Korea are starting to get back to normalcy. Early, stringent action by the authorities was effective at containing the outbreak. There is chance of flare-ups but we expect those to be dealt with rapidly. Other countries such as Taiwan, Hong Kong and Singapore also appear to have been successful in limiting the disease spread. The biggest risk for these nations now is nationals returning home from countries on the fast escalation curve – notably Europe and the USA.

In the last eight days, the number of confirmed cases has risen by almost 100,000. Almost a quarter of these new cases are in Italy, with many more in Spain, France and Germany. The UK has also seen a steep rise in cases, with London the epicentre of its outbreak.

The US continues to give us concern. The country as not been able to test widely, so we continue to believe the official number of confirmed cases massively under represents the true scale of the problem.

India, Russia, and many parts of the Middle East and Africa, and much of Latin America, have either been successful at preventing the virus from spreading or, more likely, are not able to test sufficiently effectively to reveal the true scale of the pandemic.

The bottom-line, is that the picture from Johns Hopkins shown below is just the ‘tip of the iceberg’. The full scale of the disease may not be known for months or even years.

Coronavirus COVID-19 Global Cases by CSSE at JHU
Source: Center for Systems Science and Engineering (CSSE) at Johns Hopkins University (JHU)

Impact on Commercial Activity

Turmoil continues on stock markets. Central banks are releasing unprecedented funds and instituting quantitative easing, but investors continue to lack confidence as they cannot see an end to the disruption. In this environment only safe haven assets are in demand – recently the US dollar. The price of gold had escalated but sold-off to cover investors’ losses in other asset classes while others opted for the US dollar above all other assets.

Many countries are being progressively locked-down. Italy has been in this state for a couple of week and is being joined by France, which is imposing penalties on citizens straying outside without good reason. Many European countries are closing land borders to prevent foreign citizens from entering. Canada and the US have closed their land border. Brazil has closed its border with Venezuela.

In markets that are locked down, all but essential stores are closed. Online remains active though and has seen strong upswings in activity.

Airlines are reducing flights, with many grounding part or all of their fleets, and temporarily laying off staff.

Reduced air traffic over the Atlantic compared to normal on 19th March.
Source: FlightRadar24

Travel and tourism, and hospitality more broadly, is hard hit with hotels empty and restaurants and bars being shuttered.

Impact on the smartphone market

Mobile phones are considered a necessity by most people. This means it is a resilient market. Recent parallels include the sub-prime mortgage crisis and subsequent global recession in 2008/9, the tech bubble bursting in 2001 and the impact of SARS in 2002/3. In each case, the market was knocked back but rebounded in the aftermath.

The market has changed since 2009 – it is now much more mature, and in the markets currently most severely impacted, almost everyone has a smartphone. For many consumers, the purchase of new smartphone is a discretionary purchase; they can choose when to buy. The consequence of this has been seen over the last few years in lengthening replacement cycles, which has caused the smartphone market to contract as people hold on to their phones for longer and longer. The immediate impact of the coronavirus pandemic, is that the replacement cycle is likely to stretch still further. But consumers will replace. So while the market will slow down during the worst period of the crisis, it will rebound; we don’t think volume will be lost – just that the pattern of demand will change.

There are two main risks, that could cause a material lowering of our long-term outlook:

  1. An extended global recession. Currently we are assuming a relatively sharp, but short recession, on a global basis.
  2. A second wave of viral infections peaking in 4Q 2020 and 1Q 2021. Past pandemics have seen this double peak. COVID-19 may be the same.

There are also mitigating factors:

  1. Preparation of a vaccine – many teams around the world are working hard to isolate a vaccine – though this is unlikely to be ready until 2021.
  2. Effective treatments – there are some promising lines of research applying current medicines to treat those most affected by this coronavirus.
  3. Herd immunity – if sufficient people in a population are infected, recover and develop immunity, it is harder for the disease to spread. It is unclear how effective this is with COVID—19.

We are updating our forecasts more frequently during this period. Subscribing clients will receive regularly-revised short-term forecasts that assimilate the latest information.

Impact on other technology markets

Demand for home working equipment and services are sharply higher, displays and headsets, and conferencing services. Access to Microsoft Teams was temporarily impacted earlier this week as thousands of normally office-based workers across Europe tried to access the service from home. More capacity is likely being made available.

Automotive Markets

Car companies are still coping with supply issues arising from the initial outbreak in Hubei Province that caused many parts to go into short supply. These companies are now having to contend with potential shortages of labor, as workers either become sick or have to self-isolate. Several factories in Europe and North America are implementing temporary closures.

We also expect demand for new vehicles to be sharply lower in many markets as car dealerships are closed.

Audio visual equipment and streaming

With higher numbers spending more time at home, demand for streaming entertainment is escalating sharply. This may trickle over into demand for new equipment such as TVs, but big discretionary spends are more likely be deferred. However, demand for hearables is likely to rise as households try to manage the situation of multiple people enjoying their own content without disrupting others. Hearable devices are readily available from online stores.

Coronavirus (COVID-19) – Update Week 11, 2020

As we predicted two weeks ago, the WHO has been forced to pronounce the coronavirus a pandemic. It doesn’t change anything much in relation to the likely viral spread, but should help focus the minds of governments that may be reluctant to take the necessary steps to contain the outbreak, or mitigate its worst effects.

Also as we noted last week, the coronavirus infection rate in China is decelerating. This is good news and should allow most factories outside the Hubei province to move back toward normal, seasonal activity levels by the beginning of the second quarter.

In other countries, however, the picture is less positive with more than 25,000 new cases reported in the last week.

Coronavirus COVID-19 Global Cases Johns Hopkins CSSE
Source: Center for Systems Science and Engineering (CSSE) at Johns Hopkins University (JHU)

The pattern of infection and recovery is becoming clearer. The infection spreads rapidly through a population, reaching a peak and then subsiding almost equally rapidly once there are no new people to infect. By locking down areas and curtailing socializing, the pool of potential virus recipients is reduced, causing the outbreak to moderate more quickly. This is what happened in China. But a rapid lockdown it is not what has happened in Iran, Italy and many other parts of Europe, and the United States. The disease has likely been in the community in these countries for several weeks before being formally identified. Containment measures are belatedly being taken in some countries, Italy for example.

Counterpoint COVID-19 Many Fewer Flights Than Normal Originating and Terminating in Italy
Source: FlightRadar24

Many Fewer Flights Than Normal Originating and Terminating in Italy

But in most other countries, little is being done to either monitor the virus’ spread, or to prevent it. Angela Merkel, Germany’s Chancellor, has warned that as many as 60-70% of the German population may become infected, if stringent measures are not taken. It is reasonable to assume that this rate of infection would apply to other, similar countries.

The USA is most concerning. Evidence from Seattle suggests the existence of coronavirus in the community as far back as early February, but the Centers for Disease Control and Prevention (CDC) was not able to effectively test for the virus at that stage and even prevented some research laboratories from reporting their own positive test results. The alarming conclusion is that the reported positive cases in the USA likely massively underrepresent the true picture of infections in the USA.

Stock Shocks

As the potential impact of the virus has become better understood, stock markets have been hit hard, with major indices registering falls in excess of 10%. Some of the falls were also related to a conflict between major oil producers that saw a sharp fall in the price of oil. Nevertheless, money markets are trying to price-in a short sharp shock to the world’s economy with little to guide them on what this will actually look like.

Supply-Driven Downturn

Most recessions have been caused by falls in demand. The most recent one of 2008-9, was triggered by a financial crisis that spilled over into a sharp reduction in demand as banks spiralled into a debt crisis of their own making.

In this case, there is the potential that workers will be prevented from working due to illness or having to isolate themselves at home. If this occurs for a significant proportion of the population at any given time, it will have a short-term negative impact on economic activity – initially from the supply of labor, but then also in demand, as consumers will refrain from buying much beyond core necessities. The shock to the system should be short-lived and likely resolved relatively quickly. We expect a rebound in most economic activity to occur before the year end.

Central banks are continuing to offer support. The Bank of England in the UK has cut interest rates by 50bps in a move that echoes that of the US Federal Reserve, last week. However in a supply-driven crisis these moves are unlikely to do much to stimulate economic activity. Governments are likely to need to support small and medium sized businesses that will inevitably struggle with cash flow problems, and support workers that are forced out of work. The UK government is implementing a raft of measures to support small businesses and the self-employed who may not otherwise be eligible for sickpay.

Impacts beyond the numbers

Rumors have been circulating for several weeks that Apple will delay the launch of the, yet to be named, lower cost iPhone. This is to be the successor of the iPhone SE, built around the same form-factor as the iPhone 8 series (SE2, iPhone 9..?).

Problems with the launch were initially thought to be because initial volume ramps could be delayed due to Foxconn’s inability to start production. Travel restrictions on Apple’s engineers flying to China to supervise pre-production testing might also be a factor. And if all these were not problematic enough, just holding a launch event at this time, is difficult. So we expect Apple to postpone the launch for a few weeks at least. Other smartphone manufacturers are continuing to launch new products however (link to blogs)

The E3 2020 expo in Los Angeles is the latest among more than 250 trade shows to be cancelled or converted to online events.


We continue to expect a rapid increase in infections in Europe, USA and many other countries over the next eight to twelve weeks before returning towards normal during 3Q and with an expectation of largely normal levels of economic activity by the year end.

Coronavirus (COVID-19) – Update Week 10, 2020

There is cautious optimism that the worst of the outbreak in China is now past. Factories are beginning to ramp up production slowly, though many are still below normal capacity at this time of year. Foxconn said it is running at about half its normal low-season capacity – this equates to about 25% of full capacity. While factories are anxious to ramp-up production, they’re also being careful that labour-intensive work does not rekindle viral outbreaks.

While this is somewhat positive for China, the outlook in the rest of the world is rather more bleak. And the realization of the potential for lasting economic disruption has caused a sharp falls of up to 15% in the value of shares on many stock markets. This has prompted central banks to intervene with support – for example a 50bps cut in interest rates by the US Federal Reserve.

Last week we outlined countries of concern as, South Korea, Japan, Iran, Italy, UK and US. We think these will be good analogues for how the virus is likely to spread more widely.

Coronavirus COVID-19 Global Cases Johns Hopkins CSSE
Source: Johns Hopkins CSSE

South Korea has continued to see infection rates escalate – mostly centered around the southern city of Daegu.

Japan is considering delaying the Olympic Games until later in the year, but has not yet cancelled the event.

Iran has the highest number of deaths outside China, but due to efforts by the regime to deny the extent of the outbreak it has likely led to a greater level of infection in the country. The number of deaths do not tally with the reported number of infections, which must be far higher than the official numbers would indicate.

Italy – it is likely that the virus was circulating for several weeks before being fully recognized. This has led to the level of infections seen and also allowed for travellers to take the infection to other countries.

UK – while the number of cases remain low, several people have been diagnosed who have not been to centers of infection or knowingly interacted with those that have. This indicates that containment is likely no longer possible. The UK government has enacted an emergency plan in which the realistic worse case scenario would see up to 20% of the workforce either off-sick or self-isolating.

USA – new cases are emerging at a fairly rapid rate now, which suggests the virus is circulating and containment is no longer possible.

More than 80 countries have now reported cases, although the actual numbers of reported cases are likely to be the tip of the iceberg; many people have only mild symptoms and may not be counted.


As China gradually recovers from the initial peak of infections, we expect factory production to gradually return towards normal. However, the reduced capacity is likely to continue into the second quarter.


While some supply restrictions ease, we are becoming more concerned about the probable impacts on demand as consumers moderate economic activity in the face of growing infection rates in multiple countries around the world. Our current scenario models a relatively modest decline in demand for smartphones outside China, but there is a growing likelihood that we will revise our estimates downward.

We have also modeled the likely impacts across a range of industry sectors relative to our base line forecasts. Some of these are shown in the chart below:

Counterpoint Coronavirus COVID-19 Expected Impact Relative to Baseline Forecast


The impact to supply and demand was most acute in China. Supply restrictions have started to show up in other global markets. However we are now expecting to see some impact to demand in global markets as consumers moderate their economic activity in the face of personal and economic uncertainty. We nevertheless expect a rapid reversion as the worst of the infection passes with a slight positive rebound effect.


The Chinese automotive sector came to almost a complete halt in January and February. This was mostly driven by a massive drop in demand, although factories also ceased activity through a combination of the Lunar New Year and coronavirus.

Internationally, auto makers have been hit by reduced supplies of parts made by Chinese companies. Several have reported the need to reduce production until supplies return to normal.

We are modelling the Chinese and global automotive sectors to rebound relatively quickly with a slight positive rebound, though we doubt all of the shortfall will be recovered in the near term.

Streaming Media and Gaming

We expect the enforced isolation that many will experience will lead to a greater consumption of streamed media such as music and video, and an increase in online gaming.


Airlines are already cutting capacity – even between countries where there are limited outbreaks. This is driven by business travellers reducing flying – partly due to generally lower activity levels and partly due to the cancellation of large events, for example MWC and the Geneva Motor Show. We expect that as travellers realize that alternatives such as teleconferencing offers a good experience and people think harder about the need for travel – especially in the face of mounting climate change evidence — there will be a longer-term reduction in absolute person/km travelled. UK regional airline FlyBe collapsed late on 4th March. It had been struggling financially, but it cited reduced bookings caused by the coronavirus as a significant factor in it halting operations. It will likely not be the last airline to fail caused by coronavirus.


We think retail will be a tale of two types – offline, brick-and-mortar stores, are likely to suffer a short term decline, while online stores will benefit. Though if there is any significant and sustained impact on logistics, then online stores may also suffer. We expect both to revert to the mean over time, though online may enjoy a slight boost while offline suffers a slight long-term reduction.


The likely extent of infections remains unclear however, we expect countries outside China will likely see a peak in infections in the May/June period before recovering towards normal by the end of 3Q beginning of 4Q. Countries’ ability to contain the outbreak now looks challenging with the emphasis shifting to managing the impact as best they can.

We will continue to monitor and update our scenarios as the situation unfolds.

Coronavirus (COVID-19) – Update Week 9, 2020

  • Global stock markets are, perhaps belatedly, responding to the escalating impact of the Coronavirus outbreak and have started falling on expectation of extended and systematic supply chain disruption. Oil prices are also lower on fears that transport will be affected. Traditional safe haven assets, such as gold, have increased in price.
  • The Coronavirus is likely to be declared a pandemic. A pandemic is when an epidemic spreads to multiple regions/countries. There are political implications to declaring a pandemic, but it doesn’t change the dynamics of the disease spread – though it will serve to heighten peoples’ focus on the potential transmission of the disease and may also contribute to further disruption.
  • With cases escalating fast in S. Korea, Iran, Italy and Japan – and further cases emerging in Germany, Brazil and several other countries, it’s probable the World Health Organization (WHO) declares a pandemic within the next few days.
  • Despite initial failings in recognizing and reporting the novel Coronavirus, China has been quite effective at limiting people’s movement and therefore spread of the virus. But other countries may be less successful at containing outbreaks. And as China is the manufacturing source for N-95 facemasks, supplies for export will be restricted. India likewise is restricting exports of facemasks. Some drugs are also likely to become supply constrained.
  • Developed nations have vulnerable supply chains – shops in big cities are resupplied daily, for example. Any breakdown in supplies can lead to panic buying, shortages and further disruption to travel and many normal behaviors at a population level. At extremes, civil unrest can result in looting and a breakdown in law and order.

Countries to watch closely for developments:

South Korea: a spike in cases and lack of clarity among potentially infected peoples’ movements will lead to more cases developing over the next week or two. Containment currently looks challenging despite the alert level being raised to RED.

Italy: a popular tourist destination, Italy is now attempting to lock-down parts of the country most badly affected. Nevertheless, cases are emerging in other countries based on people travelling from Italy. Likely a prime source for infections across Europe. The forthcoming Italy vs Ireland rugby international match has been postponed based on concern about the virus spreading with travelling fans.

Japan: most cases relate to the impounded cruise liner, Diamond Princess, but the true number could be higher due to poor handling of passengers on the cruise ship.

Iran: even the health minister has been infected. Cases likely under-reported and given the importance of some infected areas to Muslim tourists, high likelihood of spread to other Muslim nations in the region.

U.K. has now started testing people showing flu-like symptoms but who have not been to known infected areas. If infection is found it will indicate that the viral spread has not been contained.

U.S. it is likely that the true extent of cases is unknown and unreported due to lack of screening on ports of entry, lack of sufficient diagnostic testing and lack of funding to health agencies to take effective action. Increased testing, like in the UK, will reveal to extent to which the viral spread has already occurred.

Overall, our expectation that we see widespread transmission of the disease and a concomitant impact on retail sales, supply chain disruption and other economic disturbance has risen from somewhat unlikely to likely. Companies will need to plan for an extended period of disruption to a business-as-usual situation – likely lasting well into the second quarter.

Impact on China and Global Smartphone Demand

  • Demand-side: the PRC economy has been impacted severely during this period. Sales have fallen sharply and will recover slowly. We estimate a 30% drop during the lock down period. The lock down period and travel restriction period will last for at least two months, so affecting through the end of March. Some offline retailers are saying they have experienced a 50% drop in sales during the late January period. However there is some sales offset by an increase in online sales.
  • Supply-side: there will be impact to new devices to be launched in the first half which have facilities in China, as factories will not function properly. Components sourced from China will also be impacted as all factories will resume operation slowly and cautiously. This will range from displays from BOE, CSOT and semiconductors from YMTC and further on. So the negative impact from the supply chain side will last until end of Q2 minimum.
  • Our initial expectation was that the virus would be contained within two months and take three further months for things to get back to normal. We now expect Q1 PRC sales to be down by around 25% compared to our original forecast. This is 18% lower than Q1 last year. But this can worsen if the virus is not contained. Global sales will also go down 7% compared to same period last year. Overall we think Q1 and Q2 will show negative growth both globally and in PRC before rebounding.
  • This is our base case scenario. The downside risks are increasing daily and we will likely revisit this forecast based on emerging information over the next days and weeks.
  • We also expect  China smartphone sales to drop over 20% in Q1 2020. The impact of nCoV could be much more severe than many currently expect. (Click here to listen to the latest Counterpoint Podcast on the Coronavirus)