The flanker has not played since he featured for his country in the bronze medal match at the Rugby World Cup in November 2019.
It has now been confirmed Davies, who has not yet returned to full training, will require surgery to fix the ongoing issue.
Davies, who has made eight Test appearances for his country, will subsequently miss the rest of the 2019-2020 campaign.
A Scarlets spokesperson said: "Unfortunately, James continues to struggle with a hip injury that has prevented his full return to training.
"A decision for surgical intervention to facilitate his recovery has been made. It is hoped that this will allow James to begin the 2020-21 season fit and healthy."
Amid the outbreak of coronavirus, the Pro14 season was suspended on Friday (AEDT) until further notice.