The Long-Lasting Impact of COVID-19 on LCD Demand

By Graham Cook, Futuresource Consulting
Graham Cook, LCD panels, Chinese New Year, BOE, Korea, Samsung, COVID-19, China plunged, CYQ2

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COVID-19 first created the question ‘will there be enough LCD panels?’ before the more pertinent: ‘will there be any demand?!’

In terms of production, 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.

Furthermore, the provinces hit hardest by COVID-19, Wuhan and Hubei, are important for the LCD industry but are arguably not as essential as in other areas. The major panel providers BOE and China Star (CSOT) both have plants in Wuhan, but both are in the “ramping up” stage, so the temporary closure of these plants did not have a significant impact on the LCD supply chain.

Factories started to re-open in late February, subject to strict enforcement of disease prevention measures. As of mid-March, the production capacity at BOE and CSOT’s Wuhan factories reportedly continues at pace, which is very positive for both professional and consumer display production.

The home of other manufacturing giants Samsung and LGD, Korea, has also been significantly affected by the virus, but both companies have made extensive measures to limit the impact on production. For example, Samsung DID is increasing activity in its Vietnam production facilities and is even moving key staff out of Korean (and certain Chinese) plants to maximise production in the (at time of writing) largely unaffected country.

From a production perspective, the impact of COVID-19 has been relatively marginal. The geographic diversity of LCD factories was a clear contributor to this outcome – something many other industries are (in hindsight) now seeking to replicate.

However, the consumption side outside of China is now collapsing. North America and Europe is battling to contain the virus by restricting all but essential services. The effective suspension of major economies provides minimal opportunities for professional displays.

Futuresource understands that whilst demand in China plunged in CYQ1, the international market was largely unaffected, with the impact only starting to be seen in March. Demand in China is reportedly starting to rise as the number of new COVID-19 cases plummets.

However, as of late March, many countries across the world are only starting their containment journey. Shipment demand for LCD panels in CYQ2 is expected to hit a record low. Nationwide lockdowns will not only effectively suspend the fulfilment of existing projects but lead many companies to postpone all but essential spend.

Whilst latent demand is inevitable – with CYQ3 and CYQ4 expected to report consecutive quarter-on-quarter growth – the long-term impact of the economic slowdown must be noted.

How will the perception of digital signage’s value change in post-lock-down countries? After weeks trapped in their homes, consumers may flock to the high street and engage in a flurry of retail therapy. Will retailers use signage as a tool to attract much needed footfall? Or will it be perceived (at least in the mid-term) as an unnecessary expense whilst companies regain their financial footing?

What is certain is that upgrading digital signage hardware will not be as great a priority for many and so, COVID-19 is likely to be used as an excuse for relatively poor growth for the next year at least.

In the corporate world, many companies have had to shift their finite budgets in order to invest in collaboration software and other services to support their workforce moving from being office to home-based overnight. The impact of this shift in spending habits may also extend into 2021.

We are living in unprecedented times, which makes forecasting even the coming weeks incredibly difficult. We can only hope that the international market recovers as swiftly and completely as China.

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