Did LG Display Finally Decide?
Samsung Display (pvt) made its decision to exit the large panel LCD TV production business quite some time ago, selling its last fab in China, and converting much of its LCD capacity to OLED, leaving only one fab still producing LCD TV panels at the request of parent Samsung Electronics (005930.KS). LG Display has reduced its large panel exposure over the last two years but has maintained a larger LCD panel presence than SDC, which until the middle of last year, served them well. Since then LCD TV prices have declined 51.5% from their peak only 9 months ago and are expected to decline again this month, putting marginal producers worrying whether they can sell such panels above cash costs.
The Korean Economic Daily is stating that LG Display (LPL) has made the decision to reduce its LCD TV panel production in Korea and China, as competition from Chinese panel producers continues to intensify. LGD is said to be cutting LCD TV panel production by 10% relative to the first half of this year, which is a surprisingly smaller cut than we had already built into our LGD capacity model. As has been the case for a number of years, expectations are that the soon to be shuttered capacity will be converted to large panel OLED TV panel production, although much depends on the global economic environment and a potential deal with Samsung Electronics that would establish them as a new customer.
The Korean Economic Daily is stating that LG Display (LPL) has made the decision to reduce its LCD TV panel production in Korea and China, as competition from Chinese panel producers continues to intensify. LGD is said to be cutting LCD TV panel production by 10% relative to the first half of this year, which is a surprisingly smaller cut than we had already built into our LGD capacity model. As has been the case for a number of years, expectations are that the soon to be shuttered capacity will be converted to large panel OLED TV panel production, although much depends on the global economic environment and a potential deal with Samsung Electronics that would establish them as a new customer.
Aggregate TV PAnel Pricing & ROC - 2019 - 2022 - Source: SCMR LLC, Company Data
We are surprised that LG Display is not being more aggressive in closing large panel LCD capacity, although we expect if large panel prices continue to decline they will hasten their retreat form the LCD TV panel business, but we expect that they feel that they can run the remaining LCD TV fabs at least at break-even until they are able to justify the expense of converting same to new large panel OLED capacity, where they dominate the industry. That said, building a large panel OLED fab is an expensive and time consuming project, and typically produces less in terms of capacity than the LCD production facilities that it replaces, so it is not an easy decision for LGD to make, but there is a point at which the Band-Aid needs to be ripped off and a full decision needs to be made. We believe the company has already made such a decision but executing such a major upheaval is a daunting task. All in, if they do make even the 10% reduction this year at least it is a step in the right direction, but China is certainly not going away and will inevitably drive higher cost producers out of the LCD TV panel market unless they are so specialized that they can survive.
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