The following analysis shows TrendForce’s investigations of key component and other downstream technology industries, under the impact of the coronavirus (COVID-19) outbreak, with the latest data as of February 14, 2020.

LED

In terms of the upstream substrate, chip to downstream packaging sector, because the number of LED manufacturers in Wuhan and Hubei core affected areas is limited, only a few manufacturers affected. The LED manufacturers in other parts of China were constrained by the slow pace of the resumption of work, and they may be unable to return to full production in the short term. Overall, the LED industry has been oversupplied since 2019, and there has been inventory for sale, so the short-term impact will be small. The medium to long term will depend on the condition of resumption of work.

In addition, the LED packaging industry chain is mainly distributed in Guangdong and Jiangxi Province. Although they are not the center of the epidemic, because their manpower demand is large and most of the employees come from the expatriate population all over China, if the medium- and long-term problem of labor shortages is not resolved, the impact will be more severe. As for the demand side, various operators have begun to stock up orders in advance and increase the inventory level, thus pushing up a wave of stock demand. Each production link will decide whether to raise the price in response according to each supply status.

(Image: Pixabay)

Panels

Panel makers are currently maintaining maximum wafer input for front-end arrays. However, back-end module houses, downstream brands, and ODMs face great manufacturing uncertainties because of the coronavirus outbreak. First, it is unclear if previous plans for Chinese city workers to resume work on February 10 can take place, since the outbreak has not shown any signs of slowdown, and a growing number of cities have been placed under quarantine. Second, even if work is to be resumed, the outbreak has severely affected domestic traffic and logistics. The impact is expected to cause difficulties in the transport of key components and labor force. In terms of panel prices, we predict TV panels to continue the uptrend which began in January. But panel prices for monitors and notebooks face many uncertainties. In February, their quote prices are expected to stay flat as that in January. The future prices will depend on how the situation develops after the work is resumed in the second half of February.

Wearables

Product assembly of smart watches, smart bracelets, and TWS Bluetooth earphones primarily takes place in Guangdong, Jiangsu, and Zhejiang. In spite of the projected mid-February work resumption date, work stoppages, labor shortages, and material shortages can bring about a decline in 1Q20 production volume, with deferred releases of new products originally scheduled for 1H20 release. But on the whole, peak sales season for wearable devices happens in 2H20, during which market-leading devices such as Apple Watch will be released. Given that the outbreak does not persist in 2Q20, TrendForce remains neutral to slightly optimistic about this year’s shipment of wearable devices worldwide.

In terms of the Chinese market, Chinese-branded wearables are mainly aimed at domestic sales and therefore expected to suffer more losses in 1H20 compared to international brands. In particular, competitive-priced generic brands and new brands may be even more affected by the outbreak because component suppliers and production capacities are prioritized to fulfill orders from established brands first, and consumers will have reduced willingness to buy in the short term.

Smartphones

The outbreak has made a relatively high impact on the smartphone industry because the smartphone supply chain is highly labor-intensive. 1Q20 smartphone production is projected to decline by 12% YoY, making it the quarter with the lowest output within the past five years. Parts in the upstream supply chain, including passive components and camera modules, are also showing shortages, which can potentially continue to negatively affect smartphone production in 2Q20, if the outbreak is not contained by the end of February. Should the outbreak intensify, TrendForce considers market need to be the most important consideration in the long-term analysis of the smartphone industry. Because of the interconnectedness of the global economy, the progression of China’s outbreak damages not only China’s GDP, but also the overall global economy, leading to a reduction of consumer purchasing power and subsequently presenting a difficult challenge for the overall smartphone industry. 2020 smartphone production is projected to reach 1.381 billion units, a 1.3% decline YoY and the lowest output since 2016. Still, due to the outbreak’s mercurial nature, it is entirely possible for 2020 smartphone production to fall below this forecast.

Notebooks, LCD monitors, and LCD TVs

The downstream ODMs and brands in the supply chain are undoubtedly hit the most by the coronavirus outbreak. These companies lost precious working days after work resumption was postponed. After their production is resumed, on a whole, operators' work resumption rate is low. Besides, all types of materials and components are in shortage. Hence, productivity plummets. For TVs and monitors, their manufacturing processes and demand for materials are similar. Therefore, according to TrendForce, in 1Q20, the TV set shipment is predicted to fall from previous prediction (48.8 million units) to 46.6 million units because of the outbreak. The monitor set shipment is projected to decrease from previous prediction (29 million units) to 27.5 million units. To assemble a NB set requires complicated key components. At the current stage, NB's batteries, hinge, and PCB already experienced shortage or out of stock. This factor might cause some brands' shipment quantity to remarkably drop from previous prediction (35 million units) to 30.7 million units in 1Q20.

The pandemic not only negatively affected the production's supply chain, but it also hurts China's consumer confidence and reduces end-market demand in the short and long run, respectively. Considering the pestilence's potentially negative impact to China market's demand, TrendForce moved down the top 3 application categories' shipment scales for the year 2020. TVs' shipment scale was reduced from previous prediction (219.6 million units) to 218.0 million units, down by 0.7 percentage point. Monitors' shipment was reduced from previous prediction (125.8 million units) to 124.5 million units, down by 1.0 percentage point. Notebooks' shipment was moved down from previous prediction (162.4 million units) to 160.2 million units, down by 1.4 percentage points.

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