Sierra Girds for ‘Significant’ COVID-19 Disruptions at Vietnam Supplier
The “tier 1 contract manufacturer” where Sierra Wireless sources the “significant majority” of its cellular modules and gateways has a plant in Vietnam hard hit from a spike in COVID-19 cases, spawning “widespread disruptions” that are severely impeding “our ability…
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to manufacture and ship our products,” said CEO Phil Brace on a Q2 earnings call Thursday, his first since taking the helm last month. Sierra is working with the manufacturer “to subsidize the cost of isolation hotels for their workers with the goal of resuming full production as fast as possible,” he said. It’s also ramping up two additional production sites, including one in Mexico, “to diversify our geographic production and increase our manufacturing resiliency,” he said. Sierra is imposing “strategic” price hikes to help cover some of the additional supply chain costs and investments, “while balancing our need to remain competitive in the market,” he said. “We do believe that the significant challenges we are experiencing in Q3 are temporary. Our demand remains very strong, and I believe we are taking the right actions and initiatives to navigate through them.” Orders that don't ship in Q3 are expected to ship in Q4, and “in some cases,” in Q1 of 2022, “resulting in a solid recovery, subject to COVID-19 externalities,” he said. Sierra is withholding Q3 revenue and profit guidance because “the impact of COVID-19 disruptions in Vietnam will be significant for us,” he said. There’s too much “uncertainty around the pandemic and the continued potential disruptions” to warrant issuing financial guidance, he said. Q3 revenue will be “highly dependent on our manufacturing capacity and output,” said Brace. The Vietnam disruptions started in early July, and there has been “very little, minimal, output from the manufacturing site” in Ho Chi Minh City, where other companies and industries are also “affected,” he said. Layered atop the manufacturing disruptions are bottlenecks in “logistics, shipping and customs,” he said. The stock closed 10.2% lower Friday at $16.47.