Electronics makers remain calm

"It's more the new opportunities that we are seeing postponed. Existing business is still going on." -- Peter Tan, chief executive of Fischer Tech Ltd

Flextronics International Ltd and other companies that manufacture computer-related goods in Asia say they've dodged the impact so far of a deadly respiratory illness that's hit airlines and hotels.

Factories churn out much of the world's computers, cellphones, consumer electronics and other devices in countries such as China, Malaysia and Singapore are operating normally, according to companies and analysts.

About percent of the world's notebook computers and 80 percent of motherboards, which hold chips in place for desktop computers, are made in Taiwan and China. The absence of a major disruption leaves computer companies such as Hewlett-Packard Co, Flextronics's biggest customer, and others that have increasingly shifted production to Asia untouched for now.

"People are assuming that there will be a supply-chain impact and a business impact and I don't think any of that has materialized at the moment," said Jeff Weir, a spokesman for Santa Clara, California-based National Semiconductor Corp, which packages and tests chips in Singapore and Malaysia.

The illness, called severe acute respiratory syndrome, or SARS, has killed more than 100 worldwide and caused travel industry sales to fall because tourists and companies such as drugmaker Novartis AG have curtailed trips to affected areas, including China, Hong Kong, Vietnam and Singapore.

The biggest risk posed by the illness for manufacturing companies is that they may have to shutter assembly lines if a worker were to become infected with the disease, analysts said.

Motorola Inc closed the night shift at a Singapore cellphone factory for one day when one of its employees became ill, and more than 300 workers on the shift had to be quarantined until April 4. The plant is operating normally now and no other workers contracted the disease.

Because companies rely so much on factories in China and parts produced there, if the outbreak were to worsen and result in the closure of all travel links, it would mean "nuclear winter" for the computer-related industries, said Russell Craig, analyst with Aberdeen Group, a technology consultancy.

So far, analysts say that's not happening.

"It doesn't seem like it is really affecting production or supplies at this moment," said Kitty Fok, an analyst who follows the computer industry for market researcher IDC.

"Unless there is really a serious outbreak" that stops factory employees working, electronics makers shouldn't be slowed by the disease, she said.

LG International Corp, the parent of South Korea's second-biggest electronics maker, has handed out masks to employees in southern China, who are taking morning doses of a Chinese herbal remedy to prevent colds, said Jee Sung Eun, head of the company's offices there.

While seems to have been uninterrupted, sales and marketing efforts may be hurt because executives have cut back on travel. Collaboration between employees in different countries may also be hampered, analysts said.

"Postponing trips means postponing business," said Peter Tan, the chief executive of Fischer Tech Ltd, which makes plastic parts for electronics.

"It's more the new opportunities that we are seeing postponed. Existing business is still going on," he said.

Microchip Technology Inc, based in Chandler, Arizona, on Tuesday put part of the blame for a profit shortfall on difficulty in reaching customers because of the disease, which it says has delayed purchasing decisions.

"There are customers that won't allow visits, that won't allow sales people in there," said Mitchell Little, the company's senior vice president for sales, on a conference call.

"It's putting a crimp in the process," he said.

Microchip Technology makes chips used in phone-related products and automobiles.

Other said some meetings with clients are continuing as planned.

"Customers are still coming. We had a big group yesterday," said Nina Posadas, a spokeswoman with Flextronics based near Kuala Lumpur.

"We haven't really made any changes to the way we are operating," she said.

The SARS scare threatens an industry that has already been battered by slow sales in the past two years. Semiconductor sales fell more than 30 percent in 2001 and barely rose last year. Some analysts aren't expecting much growth this year.

"SARS will go away some day and the war in Iraq will end some day," said Evelyn Ou, an analyst with Morgan Stanley in Taipei.

"At the end of the day, we still have to see demand recover," she said.