TOKYO -- The novel coronavirus outbreak has cut into Chinese production of liquid crystal displays, leaving television makers at risk of missing out on a wave of demand from this summer's Tokyo Olympics.
Both labor and materials are in short supply in a country that churns out more than half the world's LCD panels. Wuhan, the epicenter of the outbreak, is a major production hub. With panel prices rising and output having yet to recover, TV makers are rethinking plans for new models at a time that was anticipated as a bonanza for the industry.
U.S. research firm DSCC estimates that Chinese production of LCD panels for TVs dropped 20% in February.
The virus stalled work on a new BOE Technology Group plant in Wuhan. It is also likely to affect production of smartphone LCD panels and organic light-emitting display panels by Tianma Microelectronics and China Star Optoelectronics Technology, which have factories in the city as well.
China is expected to account for 57% of global LCD supply capacity this year, according to London-based Informa, and analysts see its share only growing faster. As output from China ramped up and prices dropped, South Korea's LG Display, the world's top panel maker, said last month it would end domestic production of TV panels and concentrate those operations in Guangzhou.
The coronavirus outbreak has underscored the risks of overreliance on a single supply source.
While processes such as circuit application and liquid crystal injection are increasingly automated, later steps including assembly are still labor-intensive. Panel makers that have production facilities outside China, such as LG, Sharp and Japan Display, often handle final assembly in the country, taking advantage of lower labor costs.
But many migrant workers remain unable to return to work due to travel restrictions aimed at curbing the epidemic.
Panel makers also face supply issues of their own. An executive at one such manufacturer expressed concern about a lack of truck drivers to ship parts and materials.
The disruption has driven a sharp rise in LCD prices. The cost of a 32-inch panel jumped 12% on the month in February to around $37, while 55-inch panel prices climbed 9% to $111 or so.
TV makers had planned to roll out new models to capitalize on big sporting events this summer, including the Tokyo Olympics and Paralympics as well as the once-in-four-years European Football Championship. Though a cooling global economy could weigh on consumer spending, TV manufacturers are still keen to stock up on panels.
"Companies have accepted price hikes," an analyst said.
A manufacturer that procures panels from China and assembles TVs in Japan reported that the LCD shortage had forced it to push back its release schedule for some new models.
"We've secured enough inventory for March, but we'll be affected from April on," said an executive at another TV maker.