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Impact of COVID-19 on global manufacturing
Date Published：4/24/2020 05:04:26 PM
The negative effects of COVID-19 on FDI investments are expected to be high in the energy, automotive, and airlines industries.
The "Impact of COVID-19 on Global Manufacturing Industry" report has been added to ResearchAndMarkets.com's offering.
The manufacturing sector is a major part of the economy as it accounts for nearly 16% of the global GDP in 2018. As a result, the government across the countries primarily focuses on encouraging the manufacturing sector. Certain initiatives in emerging economies to promote the manufacturing sector include Make in India and Made in China (MIC) 2025. MIC 2025 is the first stage of a larger three-step strategy to transform China into a leading manufacturing power. The initiative seeks to move China up the manufacturing value chain by utilizing innovative manufacturing technologies or smart manufacturing.
In addition, Make in India is an initiative was launched in 2015 to encourage the production of goods in India. This aims to reduce India's dependency on exporting nations by producing goods in their own country. Since the launch of Make in India, FDI in the country has followed an optimal trend. During the period, April 2014 to March 2019, FDI inflow in India was $286 billion, which is nearly 46.9% of the overall FDI received in the country since April 2000 ($592 billion). This resulted in owing to the investment-friendly policies and opening of FDI allowance in several sectors.
However, after the outbreak of coronavirus, the global FDI inflows has witnessed a sharp decline.
As per the estimation by United Nations Conference on Trade and Development (UNCTAD), the COVID-19 outbreak could cause global FDI to shrink by 5%-15%, due to the downfall in manufacturing sector coupled with factory shutdown. The negative effects of COVID-19 on FDI investments are expected to be high in the energy, automotive, and airlines industries. Due to the epidemics of COVID-19 across the globe, the manufacturers of the automobile, chemical, electronics, and aircraft are facing concerns regarding the availability of raw material. In the electronics sector, smartphones and consumer electronics companies have commenced a reduction in production operations and postponed the introduction of new products coupled with the COVID-19 outbreak, which in turn has interrupted the supply of components.
The study on the impact of COVID-19 on the global manufacturing industry is classified into automobile, food & beverage, chemical, machinery, electrical and electronics, metal, aviation, pharmaceutical and medical equipment, and others. The electronics industry is being significantly affected due to the COVID-19 epidemic, as China accounts for nearly 85% of the total value of components utilized in smartphones and nearly 75% in the case of televisions. All critical components, such as printed circuit boards, mobile displays, LED chips, memory, open cell TV panels, and capacitors are imported from China. Most of the Chinese factories were shut down due to the coronavirus pandemic. As a result, in January 2020, Chinese vendors have increased component prices by nearly 2-3% owing to shortage of supplies due to factory shutdown. Therefore, it has negatively affected the electronics manufacturing sector across the globe.
Further, the effect of COVID-19 on manufacturing industry is analyzed based on regions, including North America, Europe, Asia-Pacific, and Rest of World. In Asia-Pacific, China is mostly affected by the condition, due to the fall in industrial production coupled with the shutdown of factories. In Europe, most of the automobile companies and electronics manufacturers have temporarily closed their factories or minimize the production output, which results in loss to the global trade. For instance, Daimler and Volkswagen declared recently that they will temporarily shut down production of vehicle and engine at its factories in Europe due to the coronavirus outbreak. The initiative is aimed for the safety of their workers. The closure of factories by major automobile manufacturers resulting in a loss in automobile production, which in turn, is affecting the automobile sector in Europe.
The companies getting affected with the coronavirus outbreak include Fiat Chrysler Automobiles N.V., Ford Motors Co., Samsung Electronics Co., Ltd., BASF SE, and the Boeing Co. Some of these companies are shifting their production facility to the countries with less COVID-19 epidemic. For instance, in March 2020, Samsung Electronics Co., Ltd. declared to shift some portion of its domestic production of smartphones to Vietnam coupled the fastest growth in the spread of coronavirus in South Korea. This aims to minimize the potential effect of coronavirus on its smartphone manufacturing operations.