LED production is highly centralised in China, so anxieties relating to supply have eased fairly rapidly, as the country rebounds from weeks in lockdown. As the number of new COVID-19 cases in China plummets, key vendors are making repeated assurance that their manufacturing capacity has returned to normal, though some smaller vendors are still struggling to recover. Vendors have also been proactively indicating confidence to the market – Absen reported “business is better than usual” when detailing it has sufficient stocks, as well as production demand, covering indoors, outdoors and rental markets. Unilumin also told Futuresource that its plants in China are currently hitting 80% capacity.
Whilst supply is healthy, international demand is tumbling, as the virus rapidly spreads across the world. A China/Taiwan based LED driver supplier said in a discussion with Futuresource that “new orders from overseas users dropped over 50% in February”. Orders are expected to decline further in CYQ2 2020.
Rental & staging is expected to be among the hardest impacted verticals. March and April are typically the busiest months for this industry, but orders have vanished, as gatherings of 100 people or more are expected to be banned across the world for up to the next 6 months. A number of LED vendors are predicting zero turnover from rental & staging in CYQ2 – a result that would have been unfathomable just a few months ago – considering that some countries may not be able to curb the pandemic by June.
Similarly, fine pixel pitches for indoors and corporate are expected to report significant year-on-year declines in the coming months, as companies review or cancel orders in wake of the devastating economic impact the virus is having on key regional markets, such as North America and Europe. The retail vertical is another severe victim of the virus, with the majority of non-grocery stores closing across the world for the foreseeable future.
A post-pandemic global economic slowdown seems inevitable, and more profoundly, the potential change of consumer spending behaviours amid lower dispensable incomes may make retail even more difficult to recover.
This is at least evident from China’s economic indicators for the first two months this year, where industrial production, retail sales and investment all recorded double-digit drops. Note that around 50% of global LED sales and around 90% of production derive from China (Futuresource 2018 Global LED Report). The Chinese government is trying to reassure the country that the economy will bounce back swiftly but that is in doubt. The IMF has lowered its 2020 economic growth forecast for China from 6% to below 5.6%. LED vendors could expect an improved domestic market performance from CYQ2 if Beijing was to introduce incentive packages to boost the economy as widely speculated. Yet, when it comes to global demands, it is still too early to call, as the effectiveness of the measures to control the pandemic in many key markets remains unclear.
Despite the pervasive negativity, there are still some positives to anticipate. According to Futuresource, the global LED market reported over 30% year-on-year growth in 2019. This is a reminder that some solid market demands may be on the horizon once restrictions are lifted and normal life resumes.
Moreover, establishing a robust, often inter-departmental response system to a crisis (such as the COVID-19 pandemic) requires increasing command and management of public health and behaviour data, preferably in real time. In a post-pandemic world, governments may look to invest in such systems in order to significantly reduce the impact future contagions may have on their economies, resulting in a new vertical opportunity for NPP LED.
The incredibly challenging trading conditions have also triggered notable design innovations. Producing an LED surface that is suitable for antibacterial sprays/cleaners has become a hot claim to make. In Orange County, California, a smart retailing store has recently opened. The low contact, staff-less shop uses direct view LED ribbons on the shelves to show product information and pricing – an ideal proposition during the era of social distancing.
COVID-19 has effectively suspended the economies of several leading markets, causing demand for LED displays (and Pro AV in general) to plummet, but opportunities are present and the long-term demand for this burgeoning display technology will return. Across a growing number of verticals, LED is being heralded as the future of professional displays – a notion that not even COVID-19 can impact.