Vacations & Retirement
Last week we noted that Taiwanese panel producers AU Optronics (2409.TT) and Innolux (3481.TT) had been ‘suggesting’ to employees that they might extend their weekends or holidays as demand for CE products, particularly TVs, slowed in 2H. Many companies have cited the tariff related pull-ins as the cause for the reduced demand, and while panic has not set in yet, suggestions of this type are becoming more common, along with caution concerning 2H expectations.
This puts a number of panel producers who were basking in profitability during the early part of this year in a more questionable position for the full year. This cautious attitude seems to have spread a bit to South Korea where LG Electronics (066570.KS) is offering voluntary retirement packages to workers in its MS Division (Media & Entertainment Solutions) that is responsible for TV set and appliance sales. The packages are surprisingly generous, with severance of up to 3x current salary (based on tenure), along with tuition support for children.. Such packages are being offered to those over 50 years old or those with poor performance records, something the company has not done since 2022 and 2023.
LGE saw some impact from weaker TV set demand in 2Q, with operating profit taking a more than 46% drop y/y, leaving the MS division as the only one that saw an operating loss for the quarter. As both LGE and Samsung Display (pvt) no longer produce LCD TVs, they are dependent on Chinese and Taiwanese producers for TV set displays and modules. The tariff uncertainty and the control over pricing that Chinese LCD panel producers have over the market have made it difficult for LGE to compete with Chinese brands in many markets, and as demand slows, LGE’s ‘early retirement opportunities’ seems to indicate another road of belt tightening as 3Q develops. Most pure play CE companies are feeling at least some pressure as they move closer to the holiday season, unless they happen to have a finger in the AI ecosystem.
To us the bigger question is not 3Q, but whether the tariff mishigas will continue in 2026. If that is the case and we get another year of tariff deadlines, postponements, and threats, we do expect that affected companies will begin to accept this ‘new order’ and resign themselves to the fact that they will have to pass on the tariff costs to consumers, rather than eat the cost in the hope that things will be resolved soon. We are hoping this scenario does not play out and most tariff issues are resolved this year, but with more than 3 years to go with the current administration, there is always the chance another bogey will appear and disrupt the CE space once again.
This puts a number of panel producers who were basking in profitability during the early part of this year in a more questionable position for the full year. This cautious attitude seems to have spread a bit to South Korea where LG Electronics (066570.KS) is offering voluntary retirement packages to workers in its MS Division (Media & Entertainment Solutions) that is responsible for TV set and appliance sales. The packages are surprisingly generous, with severance of up to 3x current salary (based on tenure), along with tuition support for children.. Such packages are being offered to those over 50 years old or those with poor performance records, something the company has not done since 2022 and 2023.
LGE saw some impact from weaker TV set demand in 2Q, with operating profit taking a more than 46% drop y/y, leaving the MS division as the only one that saw an operating loss for the quarter. As both LGE and Samsung Display (pvt) no longer produce LCD TVs, they are dependent on Chinese and Taiwanese producers for TV set displays and modules. The tariff uncertainty and the control over pricing that Chinese LCD panel producers have over the market have made it difficult for LGE to compete with Chinese brands in many markets, and as demand slows, LGE’s ‘early retirement opportunities’ seems to indicate another road of belt tightening as 3Q develops. Most pure play CE companies are feeling at least some pressure as they move closer to the holiday season, unless they happen to have a finger in the AI ecosystem.
To us the bigger question is not 3Q, but whether the tariff mishigas will continue in 2026. If that is the case and we get another year of tariff deadlines, postponements, and threats, we do expect that affected companies will begin to accept this ‘new order’ and resign themselves to the fact that they will have to pass on the tariff costs to consumers, rather than eat the cost in the hope that things will be resolved soon. We are hoping this scenario does not play out and most tariff issues are resolved this year, but with more than 3 years to go with the current administration, there is always the chance another bogey will appear and disrupt the CE space once again.
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