Why it matters: The Xbox Series X and PlayStation 5 are set to arrive this holiday season, but disruption caused by the coronavirus could see the consoles delayed, according to an investment bank report. The outbreak has been impacting much of the tech industry, with Nintendo announcing that Switch production and shipments will be delayed in Japan.
The coronavirus has resulted in several manufacturing giants in China, including Foxconn, face disruption as they quarantine employees, ask some to work from home, or temporarily shut down plants. In a recent note from Jefferies Group (via Business Insider), the financial services firm warns that the longer these shutdowns go on, the more likely the next-gen consoles will be delayed or, at the least, suffer from restricted stock.
"The video game sector is currently manufacturing, or beginning to, a once-in-several-years' product generation change for the 2020 holiday season," reads the note. "If [company] shutdowns exceed a month or so, game schedules will be delayed. New consoles may likewise suffer supply issues from a prolonged disruption, ahead of their Fall 2020 planned launches."
Although most games are developed in North America, Europe, and Japan, large sections get outsourced to China. According to the note, as much as 30 to 50 percent of art creation in Western games is done in China. Things are even more concerning when it comes to hardware manufacturing, almost 100 percent of which takes place in China.
Sony, Microsoft, and Nintendo said that 96 percent of consoles imported to the US in 2018 were produced in China, highlighting how the coronavirus crisis could affect PS5/Xbox Series X manufacture, resulting in limited stocks or delays.
Sony, Microsoft and Nintendo said that 96% of consoles imported to the US in 2018 were produced in China.— Daniel Ahmad (@ZhugeEX) February 6, 2020
Hence why the coronavirus outbreak is having an impact on manufacturing. https://t.co/AAgQzF2JGM
Nintendo has already said Switch console, accessory, and game shipments have been delayed in Japan due to the virus, and the Switch version of The Outer Worlds has been postponed as Chinese developer Virtuos, which is behind the port, has temporarily shut down. The outbreak has also affected iPhone production, has seen tech giants restrict worker travel, and caused LG and Ericsson to pull out of Mobile World Congress.