[Exclusive] Samsung Electronics Finally Partners with LGD... OLED Panel Annual Supply Contract for 3 Million Units

3-Year Supply Contract from 2022 to 2024... Contract Size Expected to Exceed 5 Trillion Won
LGD Forms Grand Alliance Amid Threat from Chinese Firms... Full-Scale Entry into OLED TV Market

The Samsung Electronics building located in Seocho-gu, Seoul, on the 3rd. [Image source=Yonhap News]

[Asia Economy Reporter Minwoo Lee] Samsung Electronics is set to aggressively target the OLED TV market by sourcing organic light-emitting diode (OLED) panels from LG Display. This move is interpreted as a strategic alliance with competitor LG Display, as Chinese companies have been controlling the supply of liquid crystal display (LCD) panels, causing prices to rise continuously and gradually deteriorating the profitability of LCD TVs.

According to the financial investment and display industries on the 21st, Samsung Electronics is expected to sign a contract with LG Display to supply 2 to 3 million OLED panels annually from next year through 2024. It is reported that Han Jong-hee, President of Samsung Electronics' Visual Display (VD) Business Division, may announce this as early as this week. According to market research firm Omdia last month, the average price of a 55-inch OLED panel, a general-purpose product, was $510 (approximately 580,000 KRW) in the first quarter of this year. Based on this, the contract size is estimated to exceed 5 trillion KRW.

Accordingly, Samsung Electronics, which has not yet released an OLED TV, is expected to enter the market in earnest. While the OLED TV market is rapidly growing, Samsung has judged that it will be difficult to keep pace with the market growth speed using the large OLED panels ‘QD OLED’ currently being developed by its subsidiary Samsung Display. Although there are forecasts that Samsung Display will mass-produce QD OLED within this year, significant time is required to stabilize the yield in the early production stage. For this reason, it is expected that it will be difficult to exceed 1 million units in shipments next year with supply from its own production alone.

Cooperation between Samsung Electronics and LG Display has been discussed several times in the past but was canceled due to various circumstances such as security. However, as the demand for LCD surged recently due to COVID-19 and Chinese companies like BOE raised prices, it became difficult to guarantee profitability with LCD TVs alone. There is also an analysis that the two companies have formed a grand alliance out of concern that if they fail to secure cost competitiveness against Chinese companies in the OLED TV market, which is considered a future growth engine, the future of the domestic display industry will be uncertain.

An industry insider explained, "As the bargaining power against Chinese display companies weakened, Samsung seems to be shifting the focus to OLED by partnering with LG Display, which is a competitor to its subsidiary. Especially in a situation where the Chinese display industry poses a serious threat to domestic companies, it appears that the two companies have decided to cooperate mutually to protect and develop the domestic display ecosystem."

In this regard, a Samsung Electronics official drew a line, saying, "We are not discussing OLED supply with LG Display."