[Click eStock] "LG Display Benefits from Samsung Electronics' Diversified Component Supply Chain"

KB Securities Report

[Asia Economy Reporter Minji Lee] KB Securities expressed the opinion that LG Display is expected to see an increase in display panel volume for Samsung Electronics and a turnaround to profitability in its OLED business segment next year.

On the 7th, LG Display closed the market at 21,950 KRW, up about 6% from the previous day, marking the third highest stock price increase this year. Earlier, on April 5th, the stock rose 7.4% in one day, and on October 28th, it increased by 6.76%. It is analyzed that the expectation of Samsung significantly increasing the volume of display panels supplied by LG Display from next year, reflecting Samsung's diversification of its parts supply chain, was factored into the stock price.

According to market research firm Omdia, from next year, Samsung Electronics is expected to significantly expand the procurement ratio from LG Display and Sharp in its LCD TV panel supply chain. This is because Samsung can reduce its high dependence on Chinese LCD panels while enhancing its price negotiation power with Chinese panel manufacturers. Dongwon Kim, a researcher at KB Securities, explained, “It is expected to purchase about 10 million units of LCD TV panels annually, which is about 20% of Samsung Electronics' LCD TV panel demand. The volume of LCD TV panels supplied by LG Display to Samsung Electronics in 2022 will increase more than fivefold compared to the previous year, reaching a trillion KRW scale in terms of amount.”

The OLED TV panel market, currently exclusively supplied by LG Display, is expected to be reorganized into a supplier-centered market structure from next year, with a transition to supply shortage anticipated. This is because Samsung Electronics' entry into the OLED TV market next year is expected to lead changes in the global TV market ecosystem and OLED TV standardization, altering the global TV market landscape dominated by Chinese LCDs. Researcher Dongwon Kim said, “From next year, LG Display's price negotiation power for OLED TV panels is expected to increase significantly, and the profit scale of the large OLED business is expected to expand.”

Apple is presumed to be developing key components for the metaverse hardware XR headset, scheduled for release in the second half of next year, in collaboration with LG Display, LG Innotek, and others. Going forward, Apple is expected to equip XR devices with OLED on silicon, which has 4 to 5 times higher resolution than smartphone OLEDs, projecting benefits for LG Display.

LG Display is expected to enter a full-scale profit recovery phase for the first time in nine years since starting its OLED panel business in 2013. As the sales ratio of LCD TV panels decreases from 18% this year to 10% next year, the impact of LCD price fluctuations on performance is expected to be limited. Researcher Dongwon Kim analyzed, “From next year, both large OLED and small-to-medium OLED panel businesses are expected to turn profitable simultaneously. LG Display's Apple OLED business is estimated to expand from iPhone-centered to metaverse XR, iPad, and MacBook.”