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96 PCB007 MAGAZINE I APRIL 2020 Feature by Michael Hall, SEMI For five days in the latter half of March, the pall of the heavy human and economic toll CO- VID-19 has exacted in China appeared to be lifting. The epicenter of Wuhan reported no new coronavirus infections through domestic transmission. And in an initial step to loosen its nationwide lockdown, China began revers- ing restrictions on travel within its borders. Now, in another sign of progress, the re- gion's idled factory workforce is preparing to return to the production lines. Outside of Hu- bei province, home to Wuhan, most manufac- turing workers are expected to be back on the job by the end of this month, with the propor- tion of manufacturing employees returning to work in Hubei cities except Wuhan reaching 70% by then, said Didier Chenneveau—part- ner, supply chain practice, McKinsey & Com- pany—in a late-March webinar presented by the business consultancy and SEMI. McKinsey is also "seeing evidence of a re- bound in demand led by China's online sales" as rising consumer confidence, and a surge in the popularity of work-from-home policies spur strong spending on laptop computers, Chenneveau said. COVID-19: Economic and Microelectronics Industry Impacts—Insights From McKinsey & Company The turnaround stands in stark contrast to the unprecedented drop in demand McKinsey saw across retail and durable goods in China early in the year. Over the first two months, passenger car sales plunged 90%, smartphone receipts 40%, and retail sales 21%, leading to what Chenneveau calls a whiplash effect that could disrupt supply chains as manufactur- ers and shipping companies scramble to meet pent-up demand once a recovery takes hold. As the outlook for China's factories and suppliers brightens, concerns are shifting to the ripple effect of its deep manufacturing pullback on demand for goods in the United States and Europe. Sharp disruptions to global supply chains caused by labor shortages and knotty logistics challenges have also become worrisome. And while China is buoyed by the prospect of normalizing its workforce and manufacturing capabilities, parts shortages are bottlenecking production. In the United States and Europe, where 60% of air freight is carried in cargo holds of passenger aircraft, logistics concerns loom large with the widespread flight ground- ings. "Logistics must be a priority in any cri- sis war room because it's a big challenge," Chenneveau said.

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