LGD to Sell Guangzhou LCD Factory to Chinese TCL Subsidiary

Selected CSOT as Preferred Negotiation Partner
Sale Price Expected Up to 2 Trillion Won
Accelerating Financial Soundness Improvement and OLED Restructuring

LG Display is accelerating its sale process by selecting a preferred bidder for its Chinese liquid crystal display (LCD) factory. Once this sale contract is completed, LG Display is expected to focus on strengthening financial stability and restructuring its business around organic light-emitting diode (OLED) technology.

According to industry sources on the 2nd, LG Display announced that it had selected China Star Optoelectronics Technology (CSOT), a display subsidiary of Chinese home appliance company TCL Group, as the preferred bidder for the sale of its Guangzhou LCD production subsidiary in China.

Until now, LG Display's Guangzhou factory attracted interest not only from CSOT but also from 3 to 5 Chinese companies including BOE, the number one LCD manufacturer. However, among the companies that participated in the main bidding, CSOT was chosen as the preferred bidder because it offered the highest likelihood of closing the deal and presented the best terms in terms of acquisition price and operational support plans. Industry insiders estimate that CSOT proposed between 1.5 trillion and 2 trillion KRW to acquire the factory.

CSOT is the world's second-largest manufacturer of large LCD panels. According to Omdia, CSOT's market share was 17.4% last year. It acquired Samsung Display's 8.5-generation LCD factory in Suzhou, China, in 2021, and is reportedly eager to acquire LG Display's Guangzhou LCD factory to compete with market leader BOE (32.3%). LG Display's large LCD market share is 11%, and if CSOT acquires the Guangzhou factory, its share will approach 30%.

LG Display and CSOT are expected to begin full-scale contract negotiations over the detailed terms of the stock purchase agreement (SPA). Since government approval is also required, it is expected to take more time to complete the sale. Industry experts predict that if the sale proceeds smoothly, it could be finalized within the third quarter.

If the Guangzhou factory is finally sold, LG Display's financial soundness is expected to improve significantly. LG Display posted operating losses of 2.5102 trillion KRW and 2.085 trillion KRW in 2022 and last year, respectively. Although the deficit is expected to shrink significantly compared to last year, it is still projected to incur losses exceeding 500 billion KRW this year.

President Chung Cheol-dong, who has stepped in as LG Display's savior, has prioritized turning a profit and making financial soundness visible. In his New Year's address this year, President Chung stated that "a performance turnaround is an urgent task," and at CES 2024 in January, he told reporters, "We are reviewing various measures, including the sale of the Guangzhou factory in China, to secure LG Display's financial soundness, and we will strive to achieve results quickly."

This will also accelerate the business restructuring toward OLED. Due to profitability deterioration caused by low-price competition from Chinese companies, LG Display has been phasing out its domestic and overseas LCD production lines. The domestic LCD panel factory ceased production in 2022, and the utilization plan for the Guangzhou factory, which produces large LCDs, has also been under review.

LG Display is reportedly planning to use the proceeds from the sale to invest in expanding its small- and medium-sized OLED business. Until now, LG Display has mainly focused on developing large OLED technology and has lagged behind competitors in the small- and medium-sized segment. The priority investment target is the expansion of the 8.6-generation information technology (IT) OLED line. Competitors Samsung Display and China's BOE have already started trillion-KRW scale facility investments to expand their 8.6-generation lines.