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Leftovers
 
MWC Cancelled, New Phone Announcements Delayed
February 16, 2020

Smartphone vendors such as ASUS and OPPO have warned of production problems with their phones. MWC 2020, which typically has attendance of 100,000, has been cancelled.  Royole Corporation will no longer be showcasing its new line-up at the upcoming Mobile World Congress 2020. Instead, the company will announce the FlexPai 2, a brand-new foldable phone featuring flagship performance and Royole's next generation flexible technologies. 
 
Figure 1: Royole Flex Pai 2

Source: Company ​

 
The Hon Hai group’s largest iPhone manufacturing facility (which accounts for more than 80% of total production) is located in Zhengzhou City, Henan Province (population around 10m), and is scheduled to begin production soon of the iPhone SE2 (a cheaper model based on the iPhone 8 platform) that we expect to be launched in April. However, a close analysis of “Notice 10” issued by Zhengzhou City suggests that large corporations (not just Hon Hai group) were unable to restart operations on 10 February, and this is due to various preparations and checks that companies need to do in order to submit a restart application, time required to draw up the necessary paperwork, and a requirement that workers be segregated (for 14 days for those coming from outside the province, 7 days for those coming from outside the city). The media reporting about the situation at Hon Hai’s Zhengzhou plant has been confused, with some outlets stating that operational restart has been postponed (Nihon Keizai Shimbun) and other saying that restart approval has been received (Reuters), but our current reading of the situation is that “while it is highly likely approval has been received, the actual timing of production restart and how quickly it can be ramped up are uncertain.”  Even when approval to restart the facility is secured, production is likely to proceed behind projected pace depending on the company’s ability to secure sufficient workers and necessary components and materials, and that there is thus a risk that a return to full production may take some time. One positive could be that the group’s Zhengzhou iPhone plant and its iPad manufacturing facility in Chengdu apparently use a comparatively high proportion of local workers. If approval has been received, there is thus the prospect that some level of manufacturing may be possible in the near term even if a low level of operations is unavoidable. We summarize the main points of Notice 10 below, and also direct you to our report of 3 February for our thoughts on the likely impact of the spread of the new coronavirus strain. We are considering producing another report regarding increasing concerns about the impact on demand for leading electronics products in China. China’s main domestic smartphone makers had been planning to push ahead as planned with the manufacture of 5G handsets despite holding excess inventory of 4G models, but we believe the virus could lead them to focus for the meantime on selling from their 4G inventory and consider trimming the number of new 5G model launches. The major Chinese smartphone brands (Huawei, OPPO, Vivo, and Xiaomi) implemented significant production adjustments in 4Q 2019, and based on our estimate that production volume was down by around 23% (130m units) compared to 3Q, or even lower, we had expected production volume in 1Q 2020 to be basically the same as in 4Q. However, we now think that output might fall by around 30%. 

Panel production of CSoT at its plants in Wuhan, the center of the coronavirus outbreak, will be hit hardest by the widespread epidemic, according to industry sources. Wuhan is the home to CSOT's Fab t3, a 6G line for the production of LTPS panels, as well as its Fab t4, which is a 6G OLED line. Fab t3, which has a production capacity of 50,000 substrates a month, had been operating at full capacity before the outbreak. The t3 line is expected to operate at 30% of its capacity in February, with prospects to halve its LTPS panel shipments to 6-7 million units in the first quarter of 2020, down from the 14-15 million units as planned previously, according to Sigmaintell Consulting. As a result, CSoT's LTPS panel shipments to two of its major clients - Huawei and Xiaomi - are likely to be short of demand in February, said the consulting firm. The 6G OLED t4 fab has just kicked volume production recently with its input of substrates totaling about 7,000-8,000 units a month at present and its output should not have much impact on the entire industry. BOE Technology kicked off operation of its 2nd 10.5G line in Wuhan at the end of 2019. The fab is currently operating at reduced capacity of 1,000 substrates each in January and February and possibly 1,500 units in March. Although Tianma Microelectronics also operates a 6G OLED line in Wuhan, the utilization rate of the fab has been low at 5,000 substrates a month, and therefore the performance of the fab should also not be much impacted by the virus, commented the sources.
 
Overall, the price of large-size panels will continue to fluctuate in the short term, mainly due to the short supply of upstream materials and traffic curbs in China, said Sigmaintell, expecting some shipments to be delayed from February to March, pushing up prices of large-size TV panels in February-March. In February, quotes for 32-inch TV panels edged up US$1; those for 39.5-, 43- and 50-inch models increased US$2; and prices for 55- and 65-inch panels were up US$3, said the firm.