At present, the new coronavirus epidemic has been basically controlled in China, but it has spread in some countries and regions abroad. From the perspective of the harmfulness of the new coronavirus epidemic, the global spread of the epidemic and its further deterioration will cause serious economic and social impacts. As of March 12, Beijing time, Italy had a total of 12,462 confirmed cases, South Korea’s cumulative number of confirmed cases of new coronavirus rose to 7,869, Iran has confirmed a total of 9,000 cases, and the United States has confirmed more than 1,000 cases. Under the trend of globalization of the epidemic, the export of Chinese LED companies will face severe challenges. At the same time, in terms of imports, the upstream supply side will also be affected. When will this series of "black swan incidents" be alleviated? How should enterprises "self-help"?
Overseas epidemics increase uncertainty for foreign trade companies
According to customs statistics, in the first two months of this year, the total value of my country’s import and export of goods was 4.12 trillion yuan, a decrease of 9.6% over the same period last year. Among them, exports were 2.04 trillion yuan, down 15.9%; imports were 2.08 trillion yuan, down 2.4%; the trade deficit was 42.59 billion yuan, compared with a surplus of 293.48 billion yuan in the same period last year. Before the outbreak of the overseas epidemic, economists generally believed that the Chinese economy would quickly go out of the path of a V-shaped/U-shaped rebound after the weakening in the first quarter. However, with the outbreak of overseas epidemics, this expectation is changing. At present, foreign countries' expectations for economic growth are more pessimistic than domestic ones. Due to the different medical conditions, attitudes and methods of responding to the epidemic in various countries, the uncertainty of overseas epidemics has increased significantly, and many economies have lowered their economic growth expectations for 2020. If so, the uncertainty of external demand brought about by the epidemic will have a secondary impact on Chinese foreign trade companies.
From the perspective of foreign demand: countries affected by the epidemic will strengthen strict supervision of the movement of people based on the demand for control. Under strict supervision conditions, this will lead to a decline in domestic demand in the country, which will lead to an overall decline in imports. For the LED display industry, the application demand will also be simultaneously affected by the decline in the market demand for commercial displays such as various exhibition events, stage performances, and commercial retail in the short term. From the domestic supply side, in February, in order to control the new coronavirus epidemic, large-scale enterprise factories stopped work and production, and some companies had to face the cancellation of orders or delayed delivery. The supply side of exports was significantly affected, which caused a significant decline. From a sub-item point of view, due to the impact of work stoppage and the difficulty of resuming work for labor-intensive products, the decline in our country's exports in the first two months was relatively obvious.
Important trading partner countries' exports decreased and hit the upstream supply side
As our country is highly dependent on Japan, South Korea, the United States, Italy, Germany and other countries in terms of machinery and electronics, chemicals, optical instruments, transportation equipment, and rubber and plastics, it is more vulnerable to the impact of the escalation of the epidemic. The shutdown of foreign companies, the outage of logistics, and the reduction of exports will directly impact the supply of upstream raw materials in the LED display industry, and some materials may experience price increases; at the same time, the supply and price changes of materials indirectly impact the production and sales of screen companies in the industry chain . The worsening of the epidemic in Japan and South Korea has caused a shortage of global semiconductor raw materials, core components, and increased manufacturing costs, which have impacted the global semiconductor industry chain. Since China is an important purchaser of semiconductor materials and equipment in the world, it will be directly affected, which will also directly affect domestic LED displays. The screen industry has caused no small impact.
Although China has developed rapidly in the semiconductor field in recent years, due to technological gaps, key materials, equipment and parts cannot be replaced in the short term. The aggravation of the epidemic in Japan and South Korea will lead to increased production costs and prolonged production periods for China’s production and application equipment companies. Delays in delivery will affect downstream end markets. Although the domestic semiconductor market is monopolized by Japanese and South Korean companies, most of the domestic manufacturers have achieved some technological breakthroughs under the promotion of major national science and technology special policies. In the future, as national policies increase support and domestic companies continue to increase R&D investment and innovation, the semiconductor field and the localization of key materials and equipment are expected to achieve corner overtaking, and related LED display upstream companies will also usher in new development opportunities .
China's foreign trade screen companies must plan ahead
First of all, foreign trade-based display companies should try their best to prepare upstream semi-finished products or raw materials for production in the future, and beware of the global outbreak of the epidemic, which may disrupt the supply chain. Foreign trade companies must pay real-time attention to the progress of the epidemic in their upstream supply chain countries. The global industrial chain under the current epidemic is already very tight, and many countries closely related to China's industrial chain have not yet taken containment measures similar to China. However, as the number of confirmed cases continues to rise, South Korea, Japan, Italy, Iran and other countries have begun to introduce more and more stringent anti-epidemic control policies, which also means that the short-term impact on the global industrial chain may become greater.
Secondly, foreign trade display companies should focus on preparing for the risk of reduced exports of finished products and increased inventory caused by the decline in demand from major exporting countries. At this time, foreign trade companies can appropriately turn to the domestic market. Due to the better control of the epidemic in China, the rapid recovery of corporate production and residents’ demand, and a substantial increase in domestic demand, foreign trade-based display companies have shifted part of their external demand products to the domestic market to hedge the decline in external demand with domestic demand, and minimize the sharp decline in external demand to enterprises the impact.
Then, foreign trade-based display companies should strengthen internal risk control, optimize institutional systems, strengthen the integration and management of customer resources, and improve organizational capabilities. Do a good job in communication, understanding and negotiation with foreign stakeholders and industrial ecology. For large and medium-sized enterprises, there are a large number of widely distributed suppliers and partners, and there are more complicated supply chain management issues. It is necessary to strengthen communication with upstream and downstream partners in the supply chain, coordinate production, and avoid interruptions in the supply chain caused by poor information, traffic interruptions, shortage of personnel, and interruption of raw materials. Finally, from the perspective of the industrial chain, foreign trade display companies should try their best to strengthen the multi-country layout of global production and supply chains to hedge against the production risks of a single country's supply chain brought about by the highly specialized division of labor.
To sum up, despite the gradual spread of overseas epidemics, some domestic LED display foreign trade companies have been "encountered", foreign demand has fallen, and the supply of core upstream raw materials has been impacted, which has caused a series of chain reactions such as price increases. It is gradually improving, and the domestic terminal market demand is gradually released, which will sweep away the heavy haze of the epidemic. With the advent of "new infrastructure" and other policies, LED displays will usher in a new wave of technology or products development wave.
Post time: Aug-31-2020