SARS puts an end to business as usual in Asia

It's not business as usual in some parts of Asia anymore.

The outbreak of SARS (severe acute respiratory syndrome), a potentially deadly disease that is caused by a previously unknown and highly infectious virus, has disrupted the operations of companies in Hong Kong, Singapore and China. And analysts warned that the spread of the disease, if unchecked, could limit the supply of some key electronic components, affecting the availability and pricing of some hardware systems.

SARS first appeared in China's southern province of Guangdong, home to much of the country's low-cost electronics and IT hardware manufacturing industry, and then spread to other parts of the country as well as to Hong Kong, Singapore and Vietnam. Other Asian countries reporting SARS cases, albeit in far lower numbers, include Taiwan, Thailand, Malaysia and Indonesia. The illness has spread as far as North America, Europe and Australia.

South Korea and Japan, which rank with Taiwan, Singapore and China as important hardware manufacturing centers, have so far not reported any cases of SARS.

"At a minimum, the SARS epidemic will cause schedule slippages and disrupt the aggressive growth plans that global electronics companies have for the affected geographies," Aberdeen Group Inc. analysts Russ Craig and Peter Kastner wrote in a report. "Worst case, it could result in major supply chain disruptions and another downdraft for an already challenged industry."

The United Nation's World Health Organization (WHO) yesterday put the total number of worldwide SARS cases at 1,804, with 62 deaths. Compared with the day before, the number of cases had climbed by 182, with four deaths, it said. Hong Kong has shown the greatest increase in SARS cases, with 155 new cases reported and three deaths on March 31 and April 1. The fourth death reported during the same period occurred in Singapore, WHO said.

China has the largest reported number of SARS cases, with 806 people diagnosed with the disease and 34 deaths, WHO said. In Hong Kong, which is an important transportation hub for air travel between China and Taiwan, there have been 685 cases of SARS and 16 deaths, it said.

At Intel Corp.'s Hong Kong office, an employee last weekend began to show symptoms that were considered to be consistent with the SARS virus, said company spokeswoman Josie Taylor. As a precautionary measure, Intel has asked all of its employees who work on the same floor -- one of three floors occupied by Intel in a Hong Kong office tower -- to work from home this week, extending a similar offer to employees who work on the other floors, she said.

Fears of SARS have caused many companies to cancel travel for executives and postpone meetings, said Dion Wiggins, research director at Gartner Inc. In one instance, Sun Microsystems Inc. indefinitely postponed its SunNetwork 2003 conference, originally scheduled to be held in Shanghai April 8-9, citing health concerns (see story).

At Intel, employees have been told to avoid nonessential travel, and a planned visit to Taipei, Taiwan, by Intel CEO Craig Barrett has been canceled, Taylor said.

Taiwan hasn't seen the high numbers of SARS cases reported in China and Hong Kong and hasn't been included in SARS-related travel warnings issued by the U.S. State Department and U.S. Centers for Disease Control and Prevention. Nevertheless, the Intel Developer Forum (IDF) conference in Taipei, at which Barrett had been planning to give a keynote speech, has been canceled as a result of health concerns, Intel said in a statement, adding that the IDF planned for Beijing had also been called off.

IDF conferences planned for Tokyo and Bangalore, India, will go ahead as planned, Intel said. The IDF conferences in Taipei and Beijing will be replaced by a series of smaller events over the next few months, it said.

At the Advanced Micro Devices Inc. office in Hong Kong, employees have also been advised to avoid nonessential travel. "If you really need to travel, OK. But if you don't really need to travel, then they have told us stay in our own office," said Carol Mui, a spokeswoman for the company, adding that no AMD employees have been diagnosed with the disease.

"We still may postpone some [business-related] events, but we haven't decided yet," Mui said.

In Taiwan, Acer Inc. issued a notice to employees banning travel to Hong Kong, Macau and two cities in China's Guangdong province, Shenzhen and Guangzhou. Employees were told to make use of other means to conduct business, such as holding meetings via videoconferencing.

Acer also instructed employees traveling to other cities in China to arrange their itineraries so that their flights from Taiwan to China go through Tokyo rather than Hong Kong or Macau. There are no direct flights between Taiwan and China.

To cope with health concerns, companies in Hong Kong have been scrambling to set up virtual private networks (VPN) that allow their employees to work from home, Wiggins said. "A lot of companies, when they created their business continuity plans, they didn't plan for this type of thing, [where they would ask their employees to work from home]," he said.

But while technology such as VPNs is helping Hong Kong companies deal with the SARS crisis, the ability to disseminate inaccurate information over the Internet has presented a challenge for the Hong Kong government, Wiggins said.

On Monday, a rumor, which originated online, that Hong Kong would be declared an infected area and quarantined from the rest of the world sparked a run on food stores and prompted the Hong Kong government to issue a public denial that such measures were being considered. To get word out quickly, the government turned to mobile operators in Hong Kong, asking them to send Short Message Service messages stating that the rumor was inaccurate, Wiggins said. "They wanted to make sure they quelled the rumor quickly, and I think they were quite effective," he said.

Along with the growing cost in human lives, the SARS outbreak may have lasting consequences for how hardware makers and investors see the Chinese government, which has been slow to reveal the scale of the SARS outbreak in China and has delayed efforts by WHO investigators to visit Guangdong province.

"The PRC [People's Republic of China] has not been forthcoming about the situation and until recently claimed that the outbreak had been contained," wrote Aberdeen's Craig and Kastner. "The deceit of the PRC government in hiding what has become a serious global health threat will not be quickly forgotten. A new level of suspicion by investors of the government's ability to protect investments will take years to dispel. After all, low-cost manufacturing and disrupted supply are oil and water in a just-in-time world."

Copyright © 2003 IDG Communications, Inc.

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