Education Companies Set Back by China’s Coronavirus Crisis

The economic impact of the spread of the coronavirus is rippling across the world, and education companies are also feeling those effects in a number of ways.

Education-focused businesses, in interviews with EdWeek Market Brief, said they’re worried about keeping China-based employees healthy and safe. And as Chinese factories remain shut down or short-staffed, those companies worry that components they need to assemble their ed-tech products may become scarce.

In addition, companies that have developed products for use in the Chinese education market are seeing usage numbers drop as students and teachers stay home from school.

Like others with employees based in China or nearby parts of the world, Greg Estell, president and CEO of SMART Technologies, which sells interactive whiteboards to K-12 schools and districts, said his number-one priority has been to keep employees from coming into contact with the highly-contagious coronavirus. China has reported close to 75,000 cases of the virus and more than 2,100 deaths.

SMART Technologies’ small team in China is working from home and following guidelines from the World Health Organization and other groups to avoid the virus, Estell said. The company has asked employees that do have to travel for personal reasons into the most-affected areas of China to self-quarantine when they return.

And Estelle said he made the decision to cancel the company’s participation in a huge Integrated Systems Europe audio-visual trade show earlier this month. That conference was expected to draw 82,000 people from all over the world, but only 50,000 people attended. Organizers attributed the drop to concerns about the coronavirus.

“We’re probably being extra cautious from an employee safety perspective,” Estell said. “But the most important thing is the health and safety of our employees.”

Disrupting the Supply Chain

In addition, companies big and small from many sectors of the economy are reporting anticipated revenue drops and disruptions in supplies of parts and products.  The same impact is likely to be felt in the education world, especially if Chinese factories remain shuttered or working at less than full capacity.

“It is having an impact,” said Michael Flood, the vice president of strategy for Kajeet, which provides Wi-Fi hotspots and devices to students and schools.

Kajeet was notified early on that one of their Chinese manufacturers located in the epicenter of the spread of the virus was suspending operations. The Chinese company makes a specific type of SIM card for one carrier network that is used in some Kajeet devices.

So far, Flood said Kajeet has enough “buffer inventory” to prevent any disruptions to customers, but the wider the virus spreads and the longer it impacts the Chinese economy and beyond, that could change.

“We are expecting delays on shipments,” he said.

Flood also said he’s concerned that when shipments of some materials do arrive from China, their quality may be low as manufacturers use understaffed crews or inexperienced workers. “Are these manufacturers being forced to take shortcuts or compromise quality?” he asked. “I’m concerned about quality control under those circumstances.”

Estell said SMART Technologies has had little supply-chain fallout from the virus. Last year, after wrestling with tariffs placed on goods imported from China, the company made a more concerted effort to diversify where their components are manufactured, Estell said. SMART Technologies built or bulked up partnerships across Asia and Eastern Europe.

For example, the company made a strategic decision to build one of its newest interactive flat panels in Vietnam instead of in China.

“We’re working to build up a supply chain in other markets so we’re less reliant on China,” Estell said.

Even though some of the components for SMART Technologies’ products are still manufactured in China, there have, to date, been no delays because of big orders before the Chinese New Year to increase inventory. “We’re in good shape,” Estell said.

But the company continues to monitor new developments closely, he said, with daily standup meetings by the operations teams to assess the situation.

Impact In-Country

Mike Harper, executive vice president of zSpace, a virtual reality and augmented reality company with interactive products for students and educators, is seeing a different kind of impact. His company not only manufactures some components in China, but a third of its business is selling its products in China.

“We’re seeing an issue from a customer engagement perspective,” he said, as schools are shut down. “Our professional development training and engagement with the community-at-large has been hampered.”

zSpace is attempting to provide workarounds, with more online and virtual engagement of teachers as educators do classroom planning from home.

Working with zSpace’s Chinese strategic partner and reseller, Harper said so far the company doesn’t expect a significant impact on sales. However, the first quarter of the year is typically slower, with less demand for institutional sales. More often sales rise in the second and third quarters, but Harper said his reseller noted that education funding has not waned in China, so no significant impact is anticipated.

One unexpected outcome of the virus has been a surge in interest in some of zSpace’s offerings. The company has interactive lessons for students around the flu, vaccines and human response to the illness, and one of zSpace’s partner apps has a similar experience around understanding the coronavirus.

“We’ve gotten huge interest from schools…that want to use zSpace to explain what’s happening and bring comfort and understanding,” he said. “Hopefully when they get back to school in China, they can use these to better understand what’s going on.”

Photo: A nearly deserted street in Wuhan in central China’s Hubei Province on Tuesday, Jan. 28, 2020. (AP Photo/Arek Rataj)

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3 thoughts on “Education Companies Set Back by China’s Coronavirus Crisis

  1. Fully agree with you. There is going to be even more serious impact on education, since virus has spread to other countries. However it does not seem to be crucial enough to wipe out the humanity, so education businesses should take a closer look at online education so as already did and help students to continue their education regardless what is currently happening in the world

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