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Korean Electronics and IT Firms to Resume Operation of Plants in China on Feb. 10
Normal Operation May Take Some Time
Korean Electronics and IT Firms to Resume Operation of Plants in China on Feb. 10
  • By Michael Herh
  • February 10, 2020, 11:49
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A view of Samsung Electronics' semiconductor plant in Xian, China

Korean electronics, display and battery companies resume the operation of their plants in China on Feb. 10 with the end of the Chinese New Year holidays, which were extended due to the Wuhan coronavirus outbreak.

However, it will take some time for them to go into normal operation due to lingering uncertainties such as the quarantine of those suspected of carrying the coronavirus and production disruptions at local parts and material plants.

Samsung Display is to restart its plants in China from Feb. 10. "As different local governments have different guidelines, we need to have separate discussions with each local government," a Samsung Display official said. Samsung Display operated its liquid crystal display (LCD) plant in Suzhou, China and its module plant in Dongguan, China at lower than normal utilization levels. As the holidays were extended, some lines were put on hold.

"We will restart our plants on Feb. 10," said an official of LG Display which had suspended the operation of its module plants in Yantai and Nanjing, China. The company will resume preparations for volume production of organic light emitting diodes (OLEDs) which had been carried out by minimal human resources.

LG Chem and SK Innovation will also start the operation of their battery factories in Nanjing and Changzhou, China, on the same day. "We will restart some of production lines with the minimum number of workers," an LG Chem official said.

Industry watchers say the suspension of plants during the Chinese New Year holidays is not expected to cause big production disruptions. An industry insider said, “If many workers are quarantined, it could take much time for plants to return to normal operation.”

In addition, the influence of parts and materials supply disruptions needs to be taken into account. In the case of semiconductors and displays, major parts, materials, and equipment must be supplied from Korea, Japan, and Europe, normalization will take some time as it is quite difficult to normally operate logistics chains.

Plant operations are likely to normalize within February, but demand is expected to recover slowly. In this regard, market research firm Strategic Analytics (SA) recently predicted that global smartphone shipments this year will drop two percent from its previous forecast due to new coronavirus variables. An official of the semiconductor industry said, "Unless the markets of servers, smartphones, and TVs recover, semiconductors may be burdened with increased inventory and price drops." It will go similar for the display industry.

However, some industrial analysts say that reflective benefits may be given to companies which do not have factories in China due to production disruptions at plants in China. In the case of displays, a decline in LCD prices led by Chinese LCD makers may be slowed down and semiconductor companies whose production is not affected by the virus fiasco will be able to buy some time due to the delayed operation of DRAM and NAND flash production lines at plants in China.