Due to Slowing Demand for China-Origin LCD TVs, Panel Price Decline Larger Than Expected
Steady Demand for Premium Products... Increasing Share of OLED TV Sales
[Asia Economy Reporter Gong Byung-sun] With the significant drop in liquid crystal display (LCD) panel prices, there are forecasts that LG Display's LCD division performance will be sluggish next year. However, strong demand for organic light-emitting diode (OLED) panels is expected to boost profitability.
On the 22nd, Korea Investment & Securities maintained its 'Buy' rating on LG Display but lowered the target price from 35,000 won to 33,000 won. On the 17th, LG Display's closing price was 20,000 won.
The decline in LCD demand is expected to negatively impact LG Display's performance. The easing of LCD supply and demand is due to a slowdown in LCD TV demand in China. As the panel price drop has been steeper than expected, TV set manufacturers are not accumulating inventory, anticipating further declines in panel prices. This is because panel prices had risen more than twice compared to early last year, so there is considerable room for a decrease.
However, overall LCD supply in the market is estimated to increase. Chinese panel manufacturers such as HKC and CSOT are expanding capacity in the second half of this year and the first half of next year, increasing potential LCD supply. In fact, demand for large LCD area is expected to increase by 4.5% year-on-year this year and by 1.0% next year compared to this year, but production capacity is expected to increase by 9.5% this year and 7.9% next year.
Jung-hwan Kim, a researcher at Korea Investment & Securities, said, "Reflecting the steep decline in LCD prices, LG Display's operating profit is expected to reach the break-even point in the first quarter of next year," adding, "Next year's estimated LCD operating profit is expected to be 116.4 billion won, down 78% from the previous estimate."
However, the strength of the OLED division is expected to drive growth. The share of OLED TV sales was only in the low 1% range in the first half of last year but has rapidly increased to the low 3% range currently. Researcher Kim emphasized, "This is because OLED TVs are highly profitable and demand for premium products remains solid despite the overall demand slowdown."
The plastic OLED line is expected to maintain production capacity at its maximum. For small and medium-sized plastic OLEDs, the purchase volume of OLED panels by North American smartphone customers increased from 120 million units last year to 180 million units this year.
Researcher Kim explained, "Currently, LG Display is planning expansions to meet the increasing OLED demand," adding, "It appears that the profitability of the OLED business has also been verified."
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