The global LCD TV supply chain has been upset by the earthquake in Japan on March 11, and shipments of upstream materials and components for LCD TVs have been hampered.
With China's upcoming Labor Day holiday sales in May, inventory for components may turn tight, and with panel prices waiting to rise affecting vendors' cost and ability to lower prices, demand for LCD TVs is expected to drop.
Supply of components and chips from Japan-based vendors such as Sharp and Sony is expected to be delayed after the earthquake. Although, Sharp's panel production plant was away from the areas most hit, one of its IC plants were damaged by the earthquake. Sony's chemical components plant was seriously damaged by the earthquake, and the production line for prism films has been suspended.
Japan-based makers of anisotropic conductive film (ACF) such as Sony and Hitachi account for 70% of the global supply, and production at both companies was seriously affected by the earthquake.
LCD TV industry sources indicated that the extent of damage to the production plants is unclear, and component inventory will not hold out for long under the current limitations of power and transportation. Although there are other suppliers for components such as IC chips and optical films, it takes a long time to verify products and so these alternatives will not have a significant impact on easing the current situation. Supply of components is expected to turn short in April if the supply chain from Japan do not return to normal operations in time.
Some TV vendors believe that the current issue is an expectation or fear of possible shortages. Inventory levels at retailers are usually 1-1.5 months and China vendors have already stocked up inventory in preparation for the upcoming Labor Day holidays in May. Along with the weaker than expected demand in the first quarter, overall inventory should be fully stocked and short-term impact will be limited. What is really worrying the TV vendors is the possibility of the supply chain not fully recovering even after May which would further dampen vendors' ability to launch promotions.
Demand in the end market was weak in China after the Lunar New Year holidays, and retailers have depended on price-cut promotions to generate sales, TV vendors noted, adding that vendors plan to launch promotions for the Labor Day holidays starting in April. However, sales and demand over the Labor Day holidays now faces challenges due to the new supply-side pressure.
Article translated by Yvonne Yu
