CE & Appliance Retailers, Brands, & Distributors Set To Be Hit By Coronvirus Crisis

There is a high probability that Australian retailers could face a shortage of consumer electronics and appliance stock and distributors a lack of products to sell following the outbreak of the coronavirus in provinces of China where thousands of components are manufactured.

Brands such as Apple Amazon Google and Sony, as well as smartphone brands such as Oppo and Huawei that rely on China to manufacture goods are now facing an anxious time with industry executives unable to travel to the Chinese mainland and factories closed by Chinese Authorities.

Apple, Google and Amazon have already stopped travel to China.

One category that is set to be affected is TV’s with up to 40% of display panels manufactured in the affected provinces.

Some 290 of about 800 plants named in Apple’s global supplier list are in regions that have delayed returning to work.

LG Display who supplies OLED panels to their own plants as well as Apple, for iPhone display, Panasonic Sony and Hisense are set to be affected in the past these plants have continued to operate during the Chinese Lunar New Year holiday period.

Analysts said the most immediate impact would be felt by those with operations in Wuhan, the Chinese city at the centre of the outbreak. These include flat panel display television fabrication plants owned by China Star, Tianma and BOE, which are estimated to account for a large supply of global display manufacturing.

Taiwan’s Hon Hai Precision Industry, which is also known as Foxconn and makes the majority of the world’s iPhones, suffered its biggest share price fall in almost 20 years on Friday.

Wuhan is the home to several panel fabs: a 10.5G line of BOE Technology; a 6G LTPS line and a 6G OLED line of China Star Optoelectronics Technology (CSOT); and a 4.5G a-Si line and a 6G OLED line of Tianma Microelectronics.

BOE’s 10.5G line in Wuhan, its second 10.5G fab, was scheduled to start production in first-quarter 2020 and reach full capacity at 120,000 substrates monthly a year later.

Production at the 10.5G line has now been suspended, with no timetable for its resumption claim industry executives.

Several House brand TV distributors use factories who source components from this region. House brand distributors such as Ayonz, Residentia and Westan who sell Philips TV’s whose panels are manufactured in affected factories are set to be hit.

Six Chinese provinces, including manufacturing hubs crucial for the consumer electronics and appliance industries such as Shanghai, Jiangsu, Guangdong and Chongqing, mandated that the return to work after the Lunar New Year be delayed by a week to February 10 for all but essential industries.

“The coronavirus creates a more uncertain environment than the trade war,  and the scale of the impact is bigger than Sars,” said Gary Cheung, a director at Haitong Securities in Hong Kong specialising in industrial technology.

Other tech groups with exposure to China were hit hard, with Murata Manufacturing, Tokyo Electron and Sharp all suffering dips of more than 3 per cent as a result of anxieties about disruption to supply chains.

Questions have also been raised as to whether goods that were manufactured in factories located in provinces where the virus was first detected were handled and assembled by Chinese citizens who have now been confirmed as carrying the virus.

The death toll from the coronavirus epidemic that originated in the central Chinese city of Wuhan has risen to 213 with another 1,527 people in a serious condition, the country’s National Health Commission said this weekend.

China has another 15,238 suspected cases, while 102,427 people who have had close contact with infected people are being monitored.

According to Wuhan authorities it is likely more than five million people had already left the city days before the ban on people leaving the area. Tens of thousands of these residents worked in factories or were management in factories inside the affected areas.

Hisense has 13 manufacturing facilities in China (located in the provinces/cities of: Guangdong, Guizhou, Huzhou, Jiangsu, Liaoning, Linyi, Shandong, Sichuan, Yangzhou, Yingkou, Xinjiang, Zibo and the municipality of Beijing, all of these areas are now in lockdown following the outbreak of the virus.

South China’s Guangdong Province where BBK the manufacturers of the Oppo and Realme smartphone brands are manufactured have reported over 272 confirmed cases of coronavirus including two people from Australia. BBK Electronics shipped 56.7 million smartphones last year.

There is also the possibility that display panel prices could rise due to reduced supply especially if the epidemic prolongs, makers will be unable to resume normal production or recruit enough workers, industry observers said.

While the Chinese central government has extended the Lunar New Year holidays to February 2, local governments in Guangdong, Zhejiang, Jiangsu, Fujian, Yunnan and Shanghai have lengthened the holiday period to February 9, further constraining related makers’ ability to resume normal production, commented the observers.

Mr Cheung said that the companies hit hardest by the outbreak would likely be those that relied on significant manpower in China — which, in addition to Foxconn, included Pegatron, the Taiwanese contract electronics manufacturer.

“Semiconductor manufacturing is heavily automated, whereas companies such as Foxconn and Pegatron rely heavily on labour-intensive assembly, which [is] more exposed,” said Mr Cheung.

DSCC, a consultancy focused on the display industry supply chain, said China Star was not expected to reopen until mid-March. “Thus, their Q1 ’20 shipments are most definitely at risk,” the consultancy said in a research note.

Taiwan-based panel makers AU Optronics (AUO) and Innolux both have LCD module (LCM) plants in China and both said that they have set up cross-department epidemic response centres.

One Australian distributor said “The situation looks grim. There is no dubt the supply chain is set to be affected in Australia”.