International. The growing coronavirus crisis is impacting production at display panel factories located in the quarantined city of Wuhan, China, causing a significant short-term reduction in the global supply of panels used in liquid crystal display (LCD) TVs and other products.
The city's five factories that produce liquid crystal displays (LCDs) and organic light-emitting diode (OLED) panels will experience short-term slowdowns in production compared to expected levels, according to IHS Markit technology research, now part of Informa Tech.
With the situation evolving rapidly, IHS Markit's technology research is still assessing the magnitude of the supply shortfall across multiple display types and markets. However, major Chinese panel manufacturers stated that they believe total capacity utilization for all LCD screens in the country could fall by at least 10 percent and perhaps more than 20 percent during the month of February.
With China expected to own 55 percent of global display manufacturing capacity in 2020, the immediate impact of reduced production has been a global decline in availability and an increase in the price of LCD TV panels. This has led to confusion throughout the display supply chain, as both suppliers and buyers are quick to adapt to rapidly changing market conditions.
Major Chinese suppliers of LCD panels for TVs, laptops and PC monitors now plan to raise panel prices more aggressively. For example, the price of an open-cell LCD TV panel was originally expected to increase by $1 or $2 per month in February. However, the actual increase can be $3 to $5 per month.
Laptop and monitor manufacturers could also face panel shortages as a result of coronavirus-related production challenges.
Disruption affects the balance of supply and demand.
The five display factories in Wuhan are:
China Star Optoelectronics Technology's T3 low-temperature polysilicon (LTPS) LCD fab
CSOT's T4 Gen 6 OLED fab
Tianma's TM8 Gen 4.5 LTPS LCD fab
Tianma's TM17 Gen 6 OLED fab
BOE's B17 Gen 10.5 LCD fab
Beyond the immediate impact of production at these facilities, the coronavirus is also likely to cause delays in increasing manufacturing on the new displays during the first half of 2020. This will reduce the overall availability of the panel over the next few months. It could also lead to increased strain on the supply of panels, as TV screen buyers accelerate the pace of their panel purchases to build reserves for future deficits.
While major panel manufacturers are rightly concerned about the impact of the coronavirus on consumer sales, demand for their products from TV manufacturers has increased. TV makers are pulling back their demand for panels and sometimes doubling down on booking orders to shore up their inventories. The panel maker said the increase in demand for orders delivered in February is up to 10 percent above the previous demand forecast.
LCD module supplies fall to critical levels
China's LCD panel suppliers may face an even more serious problem related to the coronavirus: a severe shortage of essential LCD modules.
Manufacturers of LCD panels outsource much of the production of such modules. However, production at several key third-party module suppliers has now ceased, severely affecting panel production across the country. Key module supplier SkyTech is drastically cutting production through mid-February.
Panel manufacturers maintain their own captive LCD module factories. However, these operations also face production bottlenecks amid the coronavirus crisis.
The module shortage could extend the impact of contagion beyond China, with a negative effect on production at display manufacturers around the world.
