I have been going to China for four decades and learned early on how important Chinese New Year is to them. The custom is for just about everybody to go home for a week during Chinese New Year and spend time with families and do things that honor their ancestors.
Millions of people head home for this week, and it is called the most massive migration of any nation for any holiday.
In some way’s it is like the west’s Christmas celebration in that they buy gifts for the family, and during Chinese New Year, which is three days, the family hosts a huge meal, and on another day, they all go out to a restaurant to celebrate the beginning of their New Year. And there are a lot of firecrackers used everywhere during these celebrations.
I was in Beijing in early November meeting with Chinese engineers, and many were talking about their New Year Plans. For them, it is the happiest week in their year. China closes down during the New Years’ week, and most companies are ghost towns.
I was privileged to be in a famous Chinese restaurant during a New Year celebration one year and is decorated with red lanterns, red streamers. And each place setting had red envelopes with red paper money, all designed to wish people a Happy and Prosperous New Year. Even more fascinating is that during the meal itself, a large paper dragon carried on the shoulder of about seven men, went through the restaurant to drive out evil spirits so everyone there could have a safe and Happy New Year.
But for millions of Chinese people this year, heading home for New Year is not an option. Millions have been quarantined in their cities to stop the spread of the CoronaVirus. The Chinese Government is working night and day to contain it from spreading, and keeping people from moving around is one significant way they are doing this.
Other cases of the CoronaVirus have been detected in other countries, and early this week and stock markets around the world took a negative dive over concerns of its spread and the potential financial damage it could have on economies and growth.
One company that benefits greatly from the Chinese New Year is Apple. Since the Chinese buy gifts for the New Year, the period just before the holiday are optimal shopping days. In past years, Apple’s iPhone has sold exceptionally well during this period. It is one of the reasons Apple’s first calendar quarter of each new year is strong even though the January-March period is slower for many other tech products sold at this time.
When I heard that people in whole cities were being quarantined, and for many Chinese New Year is being canceled, at least in terms of their going home, I wondered how this might impact Apple’s fortunes in China this quarter.
To get a read on this, I emailed a long-time friend in Hong Kong and asked him how much this might impact Apple’s Chinese holiday purchases. He told me that the actual buying cycle for making New Years’ gift purchases starts two months before New Year. Sound familiar? He said that some wait for the last minute to buy their gifts for family, but almost all buy their gifts before they get on a plane, train, or bus to go home for the New Year week itself.
He told me that for that reason, Apple iPhones or Apple products that would be for New Years’ gifts were mostly already purchased, and it should have no impact on Apple’s sales for the Chinese Years’ holiday.
He reminded me that Apple’s iPhone sales were down a year ago as the iPhone 10 series demand was a bit weaker. But he tracks sales of iPhones in Hong Kong and southern China and said that the iPhone 11 series is in much higher demand this year, and Apple is gaining back some market share in China that they lost last year.
Perhaps the bigger question for Apple today will be how this virus might impact their supply chain and manufacturers. I spoke to a colleague in the ODM market, and he told me that as of now, only two small facilities that support Apple’s supply chain are in quarantined zones. Still, because the situation is fluid, it is impossible to know how Apple’s or any other companies supply chains in China will be impacted.
That is part of the reason the stock market took such a hit as closures and partial closures eventually impacting China’s manufacturing output has traders on edge. They are beginning to factor in some worse case scenarios and adding that thinking to their investment strategies.
I was in China at the end of the Bird Flu and SARS epidemics and knew that the Chinese Government could contain these epidemics. However, each new virus presents different challenges, and it will be necessary for China and the rest of the world to contain this as fast as possible. If this does extend for months, there is no doubt that it could impact China’s manufacturing output, and that domino effect will be felt everywhere.
