Key finding: The leading Chinese suppliers of liquid-crystal display (LCD) panels for TVs, notebook PCs, and PC monitors are planning to raise panel prices more aggressively. For example, the price of an open-cell LCD TV panel was originally expected to rise by $1 or $2 in February. However, the actual increase may be $3 to $5.
The escalating coronavirus crisis is impacting production at display panel factories located in the semi-quarantined city of Wuhan, China, spurring a significant near-term reduction in the global supply of panels used in LCD televisions and other products.
The city’s five factories that produce LCDs and organic light-emitting diode (OLED) panels will experience near-term slowdowns in production compared with expected levels, according to Omdia technology research, now a part of Informa Tech.
Omdia technology research is still assessing the magnitude of the supply shortfall in multiple display types and markets as the situation evolves quickly. However, leading Chinese panel makers believe that the total capacity utilization for all LCD fabs in the country could fall by 10% at best and more than 20% at worst in February.
China is expected to own 55% of global display manufacturing capacities in 2020. As shown below, the immediate impact of the production reduction was a worldwide decrease in availability and an increase in pricing for LCD TV panels. This has resulted in turmoil throughout the display supply chain as suppliers and purchasers alike scramble to adjust to swiftly changing market conditions.
Display facilities in Wuhan are currently dealing with the severe impacts of the coronavirus outbreak. These factories are facing shortages of both labor and key components as a result of mandates designed to limit the contagion’s spread. In the face of these challenges, the top display suppliers in China have informed Omdia experts that a near-term production decline is unavoidable.
The leading Chinese suppliers of LCD panels for TVs, notebook PCs, and PC monitors are planning to raise panel prices more aggressively. For example, the price of an open-cell LCD TV panel was originally expected to rise by $1 or $2 in February. However, the actual increase may be $3 to $5.
Notebook and monitor makers may also face panel shortages because of coronavirus-related production challenges.
The five display panel factories in Wuhan are:
China Star Optoelectronics Technology’s T3 low-temperature polycrystalline silicon (LTPS)
China Star Optoelectronics Technology’s T4 Gen 6 OLED fab
Tianma Micro-electronics’s TM8 Gen 4.5 LTPS LCD fab
Tianma Micro-electronic’s TM17 Gen 6 OLED fab
BOE Technology’s B17 Gen 10.5 LCD fab
Aside from the immediate impact to production at these facilities, the coronavirus will likely trigger delays in the ramp-up of manufacturing at new display fabs during the first half of 2020 (H1 2020). This will reduce overall panel availability during the next few months. It could also result in further panel supply tightness as TV display buyers hasten the pace of their panel purchases to build stockpiles for future shortfalls.
While major panel makers are rightly concerned about the coronavirus’s impact on consumer sales, demand for their products by TV makers has increased. TV makers are increasing their panel demand and sometimes double-booking orders to shore up their inventories. Panel makers have indicated that the demand surge for orders delivered in February is as large as 10% higher than the previous demand forecast.
The labor shortage encountered by fabs in Wuhan is partly because of the Chinese government’s move to extend the Lunar New Year holidays by three days, with the last day scheduled on Feb. 2. The extension is designed to reduce travel and cut down on public gatherings to contain the spread of the disease.
However, even after workers return, many will have to undergo testing procedures to check for contagion. This will have a continued negative impact on productivity.
China’s LCD panel suppliers may face an even more dire issue related to the coronavirus: an acute shortage of essential LCD modules.
LCD panel makers outsource much of the production of such modules. However, production at several key third-party module suppliers has now ceased, severely impacting panel production throughout the country. Key module supplier SkyTech is sharply reducing production until mid-February.
Panel makers maintain their own captive LCD module factories. However, these operations are also facing production bottlenecks amid the coronavirus crisis. The module shortage could potentially expand the impact of the contagion beyond China with a knock-on effect on production for display manufacturers worldwide.