LG says coronavirus disrupting supply chain

The growing fear of contagion after the outbreak of a novel coronavirus is hitting the display supply chain structure, LG Display, the world’s display supplier said.

“Due to the coronavirus outbreak, it’s possible that the supply of liquid crystal displays (LCDs) will be reduced. We can say the situation in China is getting gradually worse,” Suh Dong-hee, chief financial officer at the LG display affiliate, told investors upon announcing fourth quarter earnings results.

Regarding plans to minimize negative effects, the executive said the company will “soon decide” on its factory operation plans in China, hinting that it could extend the production break for the safety of employees working at its plants there.

The monthly production capacity of LG’s LCD panel plant in China’s southern industrial city of Guangzhou is about 200,000. LG also runs display-manufacturing plants in Yentai and Nanjing.

“Because supply chain disruptions will delay production, the supply chain system in the display sector should function properly, if we decide on detailed production strategies,” the LG executive said. LG supplies necessary components, materials and parts from suppliers in China.

The Chinese authorities have been proactive in taking quarantine measures to contain the infection, including closing down transportation in cities and conducting screening in major transportation centers. Such measures help contain the spread of infection and promote early treatment, although they add costs and reduce economic activity.

The Chinese central government and Suzhou provincial government asked Samsung Electronics and Samsung Display to extend their employees holiday at factories there until March 8.

“Again, the outbreak of the coronavirus is making the situation very challenging. The virus outbreak will affect supply more than demand,” the executive told investors, adding it was monitoring moves by rivals in the industry.

Usually, semiconductor and display manufacturing plants can’t easily halt production entirely. So, these plants usually continue operating even through the holidays. Any production halt will affect the prices of memory chips and displays.

Regarding this year’s business outlook, the company was seeking a “meaningful turnaround” in the latter half on increased demand for its OLED panels.

“We expect to see rising demand for plastic-based OLEDs for use in high-end smartphones in the latter half of the year. Also, our OLED plant in Guangzhou will be operational and that will help us see increased sales of OLED panels,” the company executive said.

The company said it will continue restructuring its unprofitable LCD business for better returns. The executive said LG Display was aiming to ship at least six million OLED glass sheets to customers by the end of this year.

Last year, it reported a whopping 1.3 trillion won operating loss.