As the spread of COVID-19 intensifies, Futuresource Consulting shares its view on how this global health emergency is impacting the front projector market.
In terms of production, the majority of projector manufacturers had pre-planned to shut down – just not for the reasons they had anticipated. The outbreak of the virus coincided with Chinese New Year, so most manufacturers had already planned an additional two weeks of production capacity. At the beginning of the outbreak, it is thought that factories in China were in possession of at least 50-60 days’ worth of materials. This inventory excess proved to be incredibly fortuitous as it significantly limited production delays.
Factories started to re-open in February, subject to strict restrictions designed to maximise containment. Coretronic’s factory lines in Kunshan were one of the first to re-open and Appotronics reported that it was back to operating at full capacity in the first half of February.
However, it is possible that the industry will face supply issues in CYQ2, largely on account of the component production crisis which started in CYQ1. Although factories have reopened, the potential lack of raw materials needed in the assembly of end products could lead to conflicted supply capacities.
As the number of new COVID-19 cases escalates quickly outside of China, end-user demand is dwindling. Futuresource understands that while Q1 is expected to decrease year-on-year largely on account of China’s performance during the quarter, the global front projection market is likely to face more challenges in CYQ2, as the pandemic causes an effective suspension of all major economies. With the lockdowns imposed across the world and the postponement of Euro 2020 and Tokyo Olympics until 2021, Futuresource’s worst-case prediction is that H1 2020 will result in a year-on-year loss of 70%, (-61% is the base case scenario). This lack of demand will largely eradicate the potential mid-term supply issues discussed above.
In terms of application-based trends, the corporate sector will be hit hard in H1 2020 as many businesses have had to reallocate their finite budgets to collaboration tools and other services, in order to accommodate their entire workforce shifting to working from home overnight. The rapid surge in the usage of VC tools may prove to have a more damning impact on the projector industry longer-term. Research conducted by Futuresource has found a distinct correlation between the adoption of VC and a decline in demand for projection technology (as FPDs are favoured by end-users due to the perception that they offer superior brightness/pixel quality) – a trend which will undoubtedly escalate in the post-epidemic world, as remote working becomes more of a norm.
Akin to the corporate space, shipments to education are expected to report significant volume declines in H1 2020, as most schools across the world are closed for the foreseeable future. Moreover, post-epidemic austerity measures are inevitable. These reductions in government budgets may well significantly reduce global tender activity for projectors long-term.
The closure of schools across the world has proven to be a positive story for the mobile computing industry, as home schooling has led to a sudden increase in demand for PCs, driven not only by the need to continue classes through real-time online teaching but also by higher consumption of online entertainment at home. In fact, the latter reason, coupled with the wide availability of dedicated home projectors online, is expected to support shipments of home projectors in H1 2020, as consumers stuck at home look to enhance their viewing experience.
The high-brightness segment has been the projector industry’s leading growth area in recent years (global volume sales increased 7% year-on-year in 2019). Sales have been fuelled by demand for maintenance free solid-state solutions as well as the new vertical opportunities deriving from advancements in mapping technology. However, most high-bright solutions are installed in large venues (lecture theatres, museums, conference centres) which have now temporarily closed – resulting in sales plunging overnight. There have been reports of some amusement parks taking the unique opportunity of having empty premises to embark on refurbishments - which is generating at least some demand for premium projectors.
Nevertheless, the health of the high-end projector market – much like the pro lighting and pro audio industries – is intrinsically linked to the restrictions on mass gatherings enforced worldwide. It is hoped that these will be largely lifted within the next 6-8 months.
Futuresource’s worst-case forecasts is that global projector shipments in 2020 will be down 31% year-on-year (23% base case). However, it is important to note that the pre-existing challenges the projector industry has been battling for years, such as the mounting adoption of flat panel displays and high penetration rates, will still be present in the post COVID-19 world.