Due to cheaper LCD panels originating from China, LG which is currently the world’s largest manufacturer of this type of display panels has reported a loss in the third quarter of 2019. On the 23rd of October, LG announced an operating loss of 437 billion won ($372 million) for the July-September period. Besides, overall sales dipped by 4.6 % in comparison to the Q3 of 2018.
Noteworthy, this is LG’s first operating loss in Q3 in the last eight years. This quarter has usually been a silver lining for the company as it coincides with increased panel supplies to Apple ahead of the release of new iPhones. To paint a picture of how bad things could be, the new CEO Jeong Ho-young warned in his first message to employees that the “company’s survival is at risk.”
Due to oversupply from China, the average price per TV panel has fallen 20 to 30% in the last year alone, which has driven Japanese and Taiwanese suppliers out of the race and they do not want to scale production. An industry source said “This is the worst supply glut in history,” and “Nobody will be able to secure a profit.”.
Prominent Chinese suppliers which include BOE and China Star Optoelectronics Technology, with government backing have built new factories in the last four years that have surpassed South Korean, Taiwanese and Japanese companies which were previously the heavyweights in this industry.
Reports suggest that it typically takes investments worth $ 4 billion to set up a display plant and companies like LG and the previously mentioned heavyweights, who already are struggling to survive, cannot expend this much money. Therefore, it is hard for them to match the production capacities these Chinese suppliers are capable of delivering.
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A single display plant typically requires over $4 billion in investments. Japan Display, the world’s largest smartphone LCD maker that is struggling to secure a bailout, and Taiwan’s AU Optronics, a major supplier of TV panels, have already bowed out of the race to increase production.
The only other company who is capable of taking on the newly shroomed Chinese suppliers of LCD displays is, Samsung. The world’s number one smartphone manufacturer reported an operating profit of $ 44 billion last year. Out of which, it is investing $ 11 billion in premium-grade quantum-dot displays, which is based on OLED technology.
While LG also manufactures OLED displays that are still profitable, the combined sale of this type of display last year was just 2.5 million which is insignificant in comparison to LCD panels that accounted to 200 million units.
Due to its massive investment which was previously mentioned, Samsung is presumed to soon commence of mass production of OLED TV panels. Besides, Chinese suppliers are also reportedly gearing to enter this race as well. Following which, LG’s survival in this division seems short-lived. Conclusively, only time will tell, what the future holds for the company.
(via)
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