How the coronavirus outbreak and supply chain slowdown are impacting West Coast startups

Muna, a Jet City Repair employee, helps fix a device. The Seattle-based company is feeling the impact of the coronavirus outbreak due to delayed a supply chain in China. (Jet City Repair Photo)

Matt McCormick always plans for the Chinese New Year. As the owner of Jet City Device Repair in Seattle, he knows there will be two weeks in winter when the company can’t order parts from China. But this year’s delay was extended by several weeks — and there is still a lot of uncertainty about when it will end.

The coronavirus outbreak that has sickened more than 80,000 worldwide is impacting economies and companies across the globe. The Dow fell 4.4 percent Thursday — its largest point drop in history — and the S&P posted its worst day since 2011.

Startups such as Jet City Device Repair that rely on a China-based supply chain are experiencing big delays due to the global health crisis. The Seattle-based company repairs more than 22,000 devices each year, including those used in local schools. Nearly all of its parts come from China, where factories are struggling to re-open.

“We’ve had to rely on the domestic market,” McCormick said. “It’s not ideal — more expensive and lower quality.”

McCormick said a more diversified supply chain might help prevent issues in the future.

But that might be wishful thinking, according to Marc Barros, CEO of Seattle-based mobile photographer gear maker Moment.

“There is no replacement to China’s supply chain — at least not at the prices consumers want to pay,” he said. Barros added: “China has the depth of manufacturing knowledge you aren’t going to get somewhere else without consumer pricing multiplying significantly.”

More than 2,700 people have died from the novel coronavirus. And while there are signs of the virus slowing in China, outbreaks in Europe and new cases in Africa have alarmed the World Health Organization. The Centers for Diseases Control and Prevention said on Tuesday it was preparing for a pandemic and warned schools and businesses to prepare for interruptions.

“It’s very scary what’s developing,” said Stephen Cheung, president of the World Trade Center in Los Angeles. “Before it was about what is happening in China. But this is a completely different story now about ‘how do we get ready for a pandemic’.”

RealWear China and Tencent partnered on a device that allows doctors to screen patients and perform tests. This photo is of a doctor at Huaqiao Hospital near Shanghai, China. (RealWear China Photo)

At West Coast ports from Los Angeles to Seattle, long the nation’s gateway to Asia, officials said they are getting numerous cancellations from vessels that would normally ferry millions of toys, car parts, electronics and other products.

What’s complicating matters is the lack of reliable information coming out of China, said Nick Vyas, executive director of USC Marshall’s Center for Global Supply Chain Management. He expects the ripple effects to continue even after the virus is resolved.

“Long term this will be a big lesson to a lot of companies small, medium and large to have contingencies,” he said.

That plan is already underway for Mason, a Seattle startup that sells custom-built mobile hardware and software to pharmaceutical companies, restaurants, and others.

“For Mason, we’re building an elastic supply chain with a lean global footprint that has redundancies from design house, to component acquisition, to circuit board manufacturing and final assembly,” Mason CEO Jim Xiao said. “This allows us to quickly move hundreds of SKUs needed to make a single smart device to locations like India and even later this year, made in America.”

For some hardware makers, the crisis has actually opened up business opportunities.

Vancouver, Wash.-based RealWear sells ruggedized head-mounted voice-controlled augmented reality devices that industrial workers use for remote video calling, reviewing documents, and data visualization, among other tasks.

RealWear China, the company’s joint venture, recently partnered with Chinese tech giant Tencent to develop a hands-free solution in China’s hospitals, The Columbian reported. The device allows doctors to conduct hands-free video conferencing with remote colleagues, and can speed up the body temperature screening process.

It’s opened up a potential new customer vertical for RealWear, which raised an $80 million investment round last year.

“This is a compelling example of how tech companies can work together to fight coronavirus,” RealWear China CEO Bo Li wrote on LinkedIn. “This is why we are proud to work at RealWear. Startup companies like ours can also play a high-impact role in this crisis by empowering people with purpose-built technology.”

This story was reported and written as part of a partnership between GeekWire and dot.LA, the Los Angeles-based tech news startup co-founded by former Zillow Group CEO Spencer Rascoff. Rachel Uranga is a dot.LA reporter covering business, culture and technology. Follow her @racheluranga.