New coronavirus epidemic spreads worldwide, LED display companies face severe challenges in import and export trade

At present, the epidemic situation of New Coronary Pneumonia has been basically controlled in China, but it has spread in some overseas countries and regions. From the perspective of the harmfulness of the new coronary pneumonia epidemic, the global spread and further deterioration of the epidemic will cause serious economic shocks and social impact. Under the trend of globalization, the export of Chinese LED enterprises 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 events” be alleviated? How should enterprises carry out “self-help”?

Overseas epidemic situation increases the uncertainty of foreign trade enterprises

According to customs statistics, in the first two months of this year, China’s total import and export value of goods trade 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%, and 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 overseas diseases, economists generally believed that China’s economy would quickly walk out of the V-shaped / U-shaped rebound path after the first quarter of weakness. However, with the outbreak of overseas diseases, this expectation is changing. At present, foreign economic growth expectations are more pessimistic than domestic ones. Due to the different medical conditions and attitudes and methods of responding to the epidemic in various countries, the uncertainty of the overseas epidemic 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 second impact on Chinese foreign trade companies.

From the perspective of foreign demand: the countries affected by the epidemic will strengthen the strict supervision of the flow of people based on the needs of regulation and control. Under the strict supervision conditions, it will lead to a decline in domestic demand, resulting in a comprehensive decline in imports. For the LED display industry, the application demand will also be affected by the decline in the demand for commercial display markets such as various exhibition events, stage performances, commercial retail, etc. in the short term. From the domestic supply side, in order to control the new coronavirus epidemic in February, a large number of enterprise factories were shut down and stopped production, and some companies had to face the situation of order cancellation or delayed delivery. The supply side of exports was significantly affected, so it declined significantly. In terms of sub-items, labor-intensive products are relatively difficult to resume due to the impact of shutdowns and shutdowns, and the decline in China’s exports in the first two months is relatively obvious.

Exports of important trading partners decrease, hit upstream supply side 

Due to China’s high reliance on Japan, South Korea, the United States, Italy, Germany and other countries in electromechanical, chemical, optical instruments, transportation equipment, rubber and plastics, it is more vulnerable to the impact of the epidemic. The shutdown of foreign enterprises, logistics shutdown, and reduced exports will directly impact the supply side of the upstream raw materials of the LED display industry, and some materials may have price increases; at the same time, the supply and price changes of materials will indirectly impact the production and sales of screen enterprises on the industrial chain. . The worsening epidemic in Japan and South Korea has caused a shortage of global semiconductor raw materials and core components, and increased manufacturing costs. It has impacted the global semiconductor industry chain. Since China is an important purchaser of global semiconductor materials and equipment, it will be directly affected, which will also directly affect domestic LEDs. The display industry has caused no small impact.

Despite the rapid development of China in the semiconductor field in recent years, due to technological gaps, key materials, equipment and components cannot be replaced in the short term. The aggravation of the Japanese and Korean epidemic will lead to increased production costs and longer production periods for production and application equipment companies including China. Delay in delivery, which in turn affects the downstream end market. Although the domestic semiconductor market is monopolized by Japanese and Korean companies, most of the domestic manufacturers have achieved some technological breakthroughs under the impetus 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 overtaking in corners, and related LED display upstream companies will also usher in new development opportunities .

China’s foreign trade screen companies must plan ahead and make good plans

First of all, foreign trade display companies should try their best to prepare the upstream semi-finished products or raw materials needed for production in the future, and beware of the global spread of the epidemic, which will interrupt the supply chain. Foreign trade enterprises must follow the progress of the epidemic situation in their upstream supply chain countries in real time. The global industrial chain under the current epidemic situation is already very tight, and many countries that are closely related to the Chinese industrial chain have not yet taken similar measures to contain China. However, as the number of diagnosed medical records continues to rise, South Korea, Japan, Italy, Iran and other countries have begun to issue increasingly stringent control policies to combat the epidemic, 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 a decrease in exports of finished products and an increase in inventories due to a decline in demand from major exporting countries. At this time, foreign trade enterprises can appropriately turn to the domestic market. As China ’s epidemic situation is well controlled, enterprise production and residents ’demand recovers quickly, and domestic demand rises significantly, foreign trade display companies will shift some of their external demand products to the domestic market, to hedge domestic demand with the decline in external demand, and minimize external demand as much as possible. 

Then, foreign trade display companies should strengthen internal risk control, optimize the system, strengthen the integration and management of customer resources, and enhance organizational capabilities. Do a good job in communication, understanding and consultation with foreign stakeholders and industrial ecology. For large and medium-sized enterprises, there are numerous and widely distributed suppliers and partners, and there are more complicated supply chain management problems. It is necessary to strengthen communication with upstream and downstream partners of the supply chain, coordinate production, and avoid supply chain interruptions caused by poor information, traffic interruption, insufficient staff, and raw material interruptions. Finally, from the perspective of the industry chain, foreign trade display companies should try their best to strengthen the global production and supply chain multi-country layout to hedge against the production risks of a single country supply chain brought by a highly specialized division of labor.

In summary, although the overseas epidemic has gradually spread, prompting some domestic LED display foreign trade companies to be “backed by the enemy”, foreign demand has declined, and the supply side of core upstream raw materials has been impacted, resulting in a series of chain reactions such as price increases. It is gradually improving, and the domestic terminal market demand is gradually being released, which will wipe out the heavy haze of the epidemic. With the advent of the “new infrastructure” and other policies, the LED display will usher in a new development wave of technology or products.

Post time: Apr-13-2020