The More They Sell, The More They Lose: LCD Business Restructuring Likely to Accelerate

LCD reference photo

[Asia Economy Reporter Changhwan Lee] In the second half of last year, domestic electronics companies' liquid crystal display (LCD) business deficits deepened. The LCD business is losing profitability due to China's low-price competition, prompting companies to rapidly restructure toward high-profit businesses such as organic light-emitting diode (OLED).

According to the display industry and Hana Financial Management Research Institute on the 18th, Samsung Electronics' LCD business operating profit margin fell from -14.2% in the first half of last year to -24.5% in the third quarter. During the same period, LG Display's LCD division operating profit margin turned negative, dropping from 1.3% to -5.5%.

The poor performance of the LCD business division is due to a significant drop in LCD panel prices last year caused by Chinese companies' low-price offensive. Although the company's fourth-quarter results have not yet been disclosed, the industry estimates that the LCD business slump continued.

The outlook is also unfavorable. Although LCD panel prices slightly rebounded at the beginning of the year, the long-term trend remains downward, making it difficult for the LCD business to improve its performance this year as well.

Accordingly, companies have undertaken restructuring through business transformation and relocation. Samsung Display announced last year that it will invest 13.1 trillion won to gradually convert the LCD line at its Asan plant in Chungnam into a Quantum Dot (QD) display line.

Samsung Display is the world's number one OLED company but has the disadvantage of its product lineup being limited to small and medium-sized devices such as smartphones. Therefore, it plans to take the lead in the large display market by converting the low-profit LCD business into the latest QD display.

LG Display has also started reducing LCD panel production. The company plans to cease domestic production of LCD panels for TVs within this year. LCD business accounts for more than 80% of LG Display's sales. Last year, the sharp decline in LCD panel prices caused growing deficits and difficulties.

On the 6th, at a press briefing held in Las Vegas, USA, LG Display CEO Ho-young Jung said, "Domestic LCD TV panel production will mostly be wrapped up by the end of this year," adding, "We will focus on China's LCD TV panel factories."

Juwan Lee, a research fellow at Hana Financial Management Research Institute, said, "Last year, as LCD panel prices fell, domestic display companies such as Samsung and LG responded by converting existing LCD production facilities to OLED. The weak LCD panel prices are expected to continue this year, accelerating structural reform toward the OLED business."