Saturday, April 4, 2020
April 4, 2020

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Clark County businesses adjust to coronavirus impacts

Disruption of supply chain, distribution reaches Vancouver

By , Columbian business reporter
Published:
3 Photos
Workers for State Grid, China's state utility company, work in the field using RealWear's augmented-reality headset. The company said its business in China has been disrupted by the coronavirus outbreak, but it's been able to adjust to most of the impacts so far. (Courtesy of RealWear)
Workers for State Grid, China's state utility company, work in the field using RealWear's augmented-reality headset. The company said its business in China has been disrupted by the coronavirus outbreak, but it's been able to adjust to most of the impacts so far. (Courtesy of RealWear) Photo Gallery

Apple CEO Tim Cook made headlines earlier this month when he said that the company would be negatively impacted by the ongoing outbreak of a novel coronavirus in China, because some of the company’s suppliers are located in the Wuhan region where the COVID-19 virus originated.

Apple’s situation isn’t unique. Quarantine measures and travel restrictions throughout China have kept workforces at home, disrupting supply chains and slowing down shipments, and the impacts are quickly reverberating across the global trade market.

Clark County companies have begun to feel the heat as well, particularly in the tech sector.

Jay Schmidt, general manager at Silicon Forest Electronics, said the Vancouver-based circuit board manufacturer has encountered some supply-chain delays, although the impact so far has been minor. It’s going to be difficult for any electronics manufacturer to avoid the issue completely, he said, because so many electronic products are built using components manufactured in China.

“Even defense electronics in the U.S. rely on components that come from China,” he said.

Industrial laser manufacturer nLIGHT is headquartered in Vancouver but operates a manufacturing facility in Shanghai. In a conference call with investors this week, CEO Scott Keeney and CFO Ran Bareket said the facility wasn’t able to operate at full capacity because too many workers were waylaid by travel restrictions on their way back from Lunar New Year holiday trips.

Staffing levels are beginning to return to normal, Keeney said, but the company still predicted that it would take an $8 million revenue hit in the first quarter of 2020.

At the Port of Vancouver, communications director Heather Stebbings said the agency hasn’t heard of any significant challenges for its tenants so far.

Potential impacts would most likely be on the supply-chain side, she said, affecting the port’s import-driven tenants. Vancouver is primarily an export-driven port, but it does have some regular import products — most prominently, Subaru cars, and more recently, wind turbines, both of which include components manufactured in China.

But it’s too soon to tell whether those industries will be impacted, Stebbings said, and if there are impacts, they likely won’t be felt until at least the end of March.

RealWear

Vancouver-based augmented-reality headset maker RealWear has seen multiple negative impacts due to the company’s substantial business presence in China, although CEO Andy Lowery told The Columbian that there have been some unexpected lucky breaks.

Sales have seen an understandable downturn, Lowery said, because employees at RealWear’s customer companies are staying home from work. There’s also been a bit of a slowdown in RealWear’s China-based research and development efforts — not enough to cause a serious problem, he said, but the impact could worsen if the outbreak continues for a long time.

“China still hasn’t returned in any sort of meaningful way to work,” he said. “We may clear in China about half the revenue in the first quarter that we’d originally predicted.”

On the manufacturing side, Lowery said RealWear dodged a bullet. Most of the company’s flagship HMT-1 headsets are stored and shipped out of a facility in Hong Kong, which presents a major distribution challenge at the moment.

But coincidentally, RealWear is in the process of rolling out a major software update designed to make it easier for customers to manage large inventories of headsets, Lowery said. About three weeks ago, the company began to consolidate its unshipped inventory in Vancouver to oversee the update process.

“We’ve got a lot of inventory in Vancouver now,” he said.

RealWear primarily markets itself as a tool for field workers in the energy, transportation and manufacturing industries, but Lowery said the coronavirus has created an unexpected demand for the headsets in China’s health care sector.

Doctors have been able to use the headset for hands-free communication while out in the field, Lowery said, because the voice-driven software is easier to use for workers in protective gear. The headset’s camera also allows other doctors to assist remotely, viewing a live feed from worker headsets in the field.

RealWear was able to rush the headsets into the field through a partnership with Chinese technology giant Tencent. Lowery said Tencent approached RealWear and offered to help develop software to adapt the headsets for medical use, including by making them compatible with Tencent’s WeChat app, the most widely used messaging and chat program in China.

In the longer term, Lowery said the situation will likely push RealWear to explore new headset use possibilities in the medical field.

“We haven’t done as much in terms of focusing on medical, but we kind of got pulled in,” Lowery said.

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