(Yicai Global) Aug. 22 -- Power rationing and production stoppages in China's southwestern Sichuan province because of a shortfall in hydropower caused by drought, may ease overcapacity in the global liquid crystal display panel industry.

Lower productivity in Sichuan, where four display panel makers have plants, will help the entire industry clear inventories and stabilize LCD panel prices, said Li Yaqin, general manager at market research firm Sigmaintell. BOE Technology Group has four production lines in Sichuan, while rivals HKC, Tianma Microelectronics, and Truly International Holdings also have factories in the province.

To ease the electricity shortage and prioritize households, a request to high energy-consuming companies to halt production between Aug. 15 and 20 has been extended to Aug. 25, according to a document jointly issued by the provincial economic department and Sichuan Electric Power two days ago.

The 11-day suspension will lead to global production of LCD panels for televisions slumping to 80 percent of normal this month, Sigmaintell data showed. Power rationing will also affect the supply of about 4 million to 5 million LCD smartphone panels, accounting for around 5 percent of global supply in August.

Due to lackluster TV sales, Samsung Electronics announced in June that it would suspend the buying of panels. Procurement has not yet returned to previous levels despite the South Korean electronics giant gradually restarting purchases this month, Sigmaintell’s Li noted.

Li said the power supply situation in Chongqing, a municipality bordering Sichuan, is very similar. More than 20 percent of the world’s output of LCD TV panels may be impacted if Chongqing also rations electricity and calls for production stoppages, she added.

Sichuan and Chongqing have been in a heat wave since last month, causing a drought and a surge in power demand to keep cooling systems running. Electricity rationing also has impacted electric vehicle charging and battery swapping services, as well as people's livelihoods.

Editors: Dou Shicong, Futura Costaglione