LCD Panel Shipments Continue Sharp Decline
Q2 Performance Also 'Cloudy' Following Q1 Due to China Lockdown Impact
[Asia Economy Reporter Park Sun-mi] As lockdowns in major cities continue due to China's 'Zero COVID' policy, LG Display's performance shock is expected to persist into the second quarter.
According to market research firm Omdia on the 28th, LCD panel shipments in April totaled 194.61 million units, down 13% from the previous month and 15% from the same period last year. In March alone, LCD panel shipments increased by 11% compared to the previous month and decreased by only 6% year-on-year, but prolonged regional lockdowns in China have caused a sharp decline in display shipments.
In particular, due to disruptions in IT device production caused by the lockdowns in China, shipments of large panels over 9 inches decreased by 10% compared to the previous month, and shipments of small and medium-sized LCD panels used in smartphones fell by 15%.
It is analyzed that production stoppages and disruptions experienced since April by OEM manufacturers producing products for major global IT companies such as Apple, HP, and Dell, located in Shanghai and Kunshan?namely Compal, Quanta, and Foxconn?are directly leading to the decline in display shipments. There are also analyses suggesting that Apple's major product shipments in the second quarter could drop sharply by 30-40% due to China's COVID lockdowns.
This situation is also expected to impact LG Display's second-quarter performance. LG Display stated in its first-quarter earnings announcement that logistics and parts supply issues caused by external factors such as COVID lockdown measures in China affected production and shipments. The shutdowns and production disruptions at key parts suppliers located in Shanghai and Kunshan are adding to the difficulties. In fact, more than ten key parts suppliers providing polarizers, printed circuit boards, and other components to LG Display in Shanghai and Kunshan halted operations for over a month from late March to early April, with some companies only resuming partial operations this month.
An LG Display official said, "At the company-wide level, we are fully committed to COVID prevention at our production subsidiaries in China while closely monitoring the regional lockdown situation to respond to local conditions. In particular, we are striving to minimize the impact of unforeseen variables despite the difficult circumstances by diversifying supply chains and logistics routes for each component and securing safety stock."
In the securities industry, there are forecasts that LG Display's operating profit, which fell 93% year-on-year to 38.3 billion KRW in the first quarter due to the impact of China's lockdowns, could turn to a loss in the second quarter. Analyst Kwon Sung-ryul of DB Financial Investment predicted that LG Display could incur a loss exceeding 261 billion KRW in the second quarter. The operating profit margin is also expected to turn negative to around -4.3%.
However, LG Display, which had gone as far as the Singapore International Arbitration Centre in December 2019 over a patent licensing agreement with Japan's Sharp, is now able to receive 120 billion KRW in damages, which could positively affect performance improvement if the compensation amount is reflected in the accounting early. Japan's Sharp recently announced through a public disclosure that it has accepted the Singapore International Arbitration Centre (SIAC) decision to pay LG Display 11.747 billion yen (approximately 120 billion KRW).
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