Lunar New Year Brings Celebration – But Also Slowdown

Lunar New Year is one of the most important holidays in Asia, and this time of year brings a great deal of revelry and rich customs with it. From doing New Year’s shopping and lighting fireworks to the most important tradition – visiting family and friends – this is a time when a huge number of people around the world celebrate and look forward to a happy and prosperous year ahead. However, beyond celebration and some well-earned leisure, this major holiday also has a large-scale effect on industry in the region – one that ripples noticeably into the global electronics marketplace.

Lunar New Year occurs each year on the new moon of the first lunar month, with the festival usually falling between mid-January and late February. Among traditions such as cleaning the house to welcome in spring and the new year, leaving offerings to ancestors, and setting off fireworks, the main event of the festival is having reunions and spending time with loved ones.

This is the aspect of the holiday that we see affecting global industry. While offices in China and other countries in the region close for one or two weeks during Lunar New Year, factories generally close for a whole month (if not longer). For many factory workers in major electronics companies, this is the only time during the year when they are able to take off work in order to visit their hometowns and families. In 2014, around 3.62 billion trips were taken during and around the festival, “making this the largest human migration in the world.” This massive halt in production is a factor that businesses have to take into account months in advance. Otherwise, inventory levels, costs, and quality issues can all pose serious pitfalls.

In September or October, many manufacturers reach out to their major customers to confirm any orders that need to be filled before the holiday. With this major crunch in pre-holiday production, demand is high – but so is pressure, with quality issues cropping up (sometimes dramatically) during this eleventh-hour production and shipping rush. During this time, it’s not only important to plan carefully in order to ensure proper inventory levels; it’s also completely vital to keep an eye on the quality front to screen parts.

Even after the holiday proper, challenges crop up in the form of factory workers returning at staggered schedules, barring full production capability, or even not returning at all due to new employment opportunities found during the holiday. Because of this, it can be a slow start for companies to come back to life in the new year, especially if orders have piled up during the break or if factories’ own suppliers are getting a delayed start, too. This slowdown and the subsequent struggle to build momentum back up affect businesses at all strata of the electronics industry, from the distributors who source components for production in the crunch-months before the festival (and then feel the deadened effects of the lull in business), to the manufacturers who have to plan for other factories’ delayed schedules. Careful planning, though, can minimize the effects this large-scale global slowdown has on companies’ business.

And – challenges aside – there are a fervor and renewed energy that often come about when employees return to work from this holiday that help get things moving again. Worldwide, life and the industry both pick up again, with people warmed by the recent celebrations, the company of family and friends, and the dramatic sense of renewal that the Lunar New Year brings.

From all of us at Smith & Associates, we hope this will be the case for you and your loved ones, and wish you good health and lasting prosperity in the year ahead.

And, don’t hesitate to reach out to us if holiday schedules have left you with supply chain challenges!

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