lg lcd panel issues made in china

LG Display Co., a major South Korean display maker, is expected to stop producing liquid-crystal display panels for TV by the end of this year at the earliest, industry sources said Monday, amid falling profitability and fierce competition from Chinese rivals.

The company said in a regulatory filing last week that it was reviewing an end of production at its LCD TV panel factory in Paju, north of Seoul, without specifying the exact date of production suspension.

The panel maker has been scaling down its loss-making LCD TV panel business, with a goal of discontinuing domestic production as early as possible. It has also said it will reduce production in China in a phased manner.

Demand was falling at an "unprecedented level" both for LCD and premium organic light-emitting diode panels, the company said during an earnings call in October, after years of pandemic-driven strong growth for personal IT devices.

Facing mounting challenges, the company has been trying to turn its business around by putting more resources in LCD panels for IT products and high-margin OLED business and expanding its high-value make-to-order business.

Kim Yang-jae, an analyst at Daol Investment & Securities, forecast OLED panels will make up for more than 60 percent of LG Display"s revenue by 2023, up from less than 40 percent in 2021.

LG Display"s fourth-quarter operating profit is forecast to be around 515.9 billion won, according to an estimate by Yonhap Infomax, the financial news and information arm of Yonhap News Agency.

Samsung Display, Samsung Electronics" display unit, had scaled down its LCD TV panel business since mid-2010 and completely stopped production in June.

It appears too soon to say that Samsung Display and LG Display, the nation’s top display makers, will exit from the less lucrative LCD market amid a cutthroat competition with Chinese rivals with cheaper pricing.

Until a few years ago, the two firms had hinted at retiring from the old-school LCD business to focus on more advanced technologies such as upgraded LCDs or OLEDs to widen the gap with Chinese runner-ups.

But experts here say there has been a sign of change in the attitudes more recently, pointing out that their full shutdown of LCD operations ultimately would hinge on elevating profitability of their high-end push.

In 2020 alone, Samsung Display posted a deficit of more than 1 trillion won ($841.5 million) in its LCD business. But it has no other option but to continue production to meet the demand from its parent Samsung Electronics, the world’s largest TV maker.

The firm last year sold its LCD production facility in China to its Chinese rival TCL China Star Optoelectronics Technology, a key supplier to Samsung TVs. But the LCD line in Suzhou, China recently cut its panel supply almost in half, with Samsung’s display unit highly likely to be tasked with filling the void.

“(Samsung Electronics) have few choices but to contract with Samsung Display to make up for its LCD TV set capacity,” said Yi Choong-hoon, chief analyst at UBI Research.

This put Samsung Display‘s full exit plan in disarray. After the sell-off of the Chinese facility, the firm is also scaling down its LCD plant in Asan, South Chungcheong Province, to convert part of the facilities to its quantum-dot OLED lines to supply to set makers including Japanese firm Sony.

LG Display’s LCD business -- with production lines in Paju, Gyeonggi Province and Guangzhou, China -- is poised to generate 2.5 trillion won in operating profit for 2021, up fourfold from the previous year, according to Kim Jung-hwan, an analyst at Korea Investment & Securities, on Thursday.

This comes in sharp contrast with OLED TV earnings estimate. According to Kim, LG Display‘s OLED TV operations will post 152 billion won in operating loss, as its fourth-quarter forecast to generate 62 billion won income was dwarfed by 214 billion won losses for the previous three quarters. Since inception, LG’s OLED panel business has been in the red due to heavy spending.

Now, the question is whether the company is ready to be fully dedicated to next-generational OLED panels for premium TVs featuring self-lit pixels. Yi of UBI Research says it is too premature.

“A bigger penetration of OLED TVs to consumers is a prerequisitie for a conversion of (LG Display’s) existing LCD TV lines to OLED TV lines,” he said.

Analysts also said LG Display has already streamlined its LCD TV lines under a series of restructuring of LCD TV lines, including a conversion to lines for IT devices including mobile phones.

“(LG Display‘s) LCD TV fabs with low profit margin have completed a retreat in the first half of 2021,” said Kim Sun-woo of Meritz Securities. “LG is now capable of maintaining LCD capacity with a decent profit margin.”

This comes against the backdrop of industry projections that LCD TV panel prices continue to fall steadily over the course of the first quarter, and Chinese rivals are forecast to ramp up dominance in LCD market,

According to US-based market intelligence firm Display Supply Chain Consultants, Chinese firms’ LCD market share on a capacity basis are forecast to rise to 71 percent by 2025, from 53 percent in 2020, far outpacing Korea, Japan and Taiwan, as of June 2020.

Another estimate, released earlier this week, showed the price for LCD TV panels regardless of size -- ranging from 32- to 65-inch -- is projected to fall until March, giving up almost entire gains from July 2020 to July 2021 that is partly attributable to announced exits of Korean LCD panel makers.

The quarter-on-quarter price declines in the first quarter of 2022 to range between 10 percent and 23 percent and average 15 percent, with mid-sized panels taking the largest dip.

“Although the declines are slowing down in the first quarter, they are still severe for panel makers,” noted Robert O‘Brien, co-founder and principal analyst at DSCC.

Reports from Korean media suggest the company will drastically cut back on its input of glass substrates at its LCD assembly lines in Paju, South Korea and Guangzhou, China, slashing LCD TV panel output by more than 10% in the second half of the year compared to the first six months.

The company’s cross-town rival Samsung Display has already announced plans to quit the LCD TV panel business completely by the end of the year, due to worsening profitability.

Both companies have faced significant competition from Chinese rivals that are able to churn out large quantities of LCD TV panels at more competitive prices, pushing market prices down. Neither LG Display nor Samsung Display can match those rivals due to the higher costs they face.

Omdia reported recently that the average 55-inch LCD TV panel price declined by 30% from six months ago to just $105 in April. It has also forecast a further price decline this month.

“It is getting harder to manufacture LCD panels above production costs amid intensified competition with Chinese companies,” an anonymous source told the Korea Economic Daily. “Samsung is giving up its LCD panel development and production because it sees panel price declines are not temporary.”

Chinese manufacturers, led by BOE Technology Group and China Star Optoelectronics Technology (CSOT) have been rapidly increasing their market share in the LCD TV panel industry. At the end of last year, BOE was positioned as the world’s leading LCD TV panel maker with a 26.3% market share, KED reported.

The Korean firms are instead switching their focus to OLED display panels, where they have a technological advantage over their Chinese competitors. Data from Omdia shows that LG Display commands 99.7% of the OLED TV panel market, with Samsung Display having the remaining 0.3%.

LG Display has been accelerating OLED TV panel production for years, adding new panel sizes to its output such as the new 42-inch displays it launched this year.

Samsung Display is more competitive in the small-sized OLED panel market, producing displays for smartphones and laptops. However, it is aiming to take on LG in the OLED TV display market with the launch of its new QD-OLED TV panels this year.

SEOUL/TAIPEI/TOKYO -- With windfalls from COVID-19 fading, LG Display is grappling with a record loss as sinking demand, supply chain issues and advancements by Chinese rivals threaten its long-term position in the market.

LG Display said Wednesday that group revenue sank 6% on the year in July-September to 6.77 trillion won ($4.72 billion). Operating loss for the quarter totaled a record 759 billion won, in contrast to the profit of 529 billion won from a year earlier.

LG Display (NYSE:LPL) is one of the biggest manufacturers of thin-film transistor liquid crystal display (“TFT-LCD”) panels. However, the market for LCDs is experiencing difficulties with not enough demand to offset the increased supply. As a result, prices for LCDs have been falling, which makes it hard for manufacturers such as LG Display to remain profitable. LCD manufacturers have been feeling the heat and it’s not clear that improvement is to be expected anytime soon.

This is a worrisome development for LG investors because displays are the company"s bread and butter. However, LG has come up with a potential solution to its problems in the LCD market that it hopes will revive its fortunes and maybe calm down investors. What that solution is and how likely it is to solve LG’s woes are will be discussed next.

Prospects of a turnaround in the LCD market are low because LCD manufacturers in China such as BOE and CSOT are ramping up LCD production. There are several 10.5G and larger fabs that have recently started production in China or are close to it. With so much capacity coming online, it’s hard to see how LCD prices can recover.

For example, according to Witsview, 32-inch LCD panels are in oversupply for the month of July and prices could even fall below cash costs. The situation is not much better with larger sized panels. Supplies of 65-inch and 75-inch panels will exceed demand due to new production from BOE and CSOT with their 10.5G and 11G fabs. Not only is excess inventory going up, but prices are also trending down.

LG’s response to the situation in the LCD market is to not engage in anall-out price war where it’s not certain that there will be a winner, but to redirect focus towards the LCD alternative known as organic light-emitting diode (“OLED”) displays. To be more exact, LG is focusing on large panels suitable for big-screen TVs because people are still interested in upgrading to bigger TVs that offer superior picture quality compared to older generations.

This is where OLEDs come into play. While OLEDs have a number of disadvantages compared to LCDs, most people find the picture quality of OLEDs to be superior to that of LCDs. For example, OLEDs have much better contrast because they can display the color black in a way that approaches the real thing. OLEDs are able to do this because they can turn off each pixel, which also reduces power consumption.

On the other hand, LCDs have a much harder time with the color black due to their need for backlights, which can result in light bleeding through. The black in LCD displays comes closer to the color gray for this reason. The ability to accurately display black is one of the most, if not the most, important factors in determining how good the picture quality is of a display. If you want the best picture quality in a TV, then OLED is generally regarded as the number one choice as long as you"re willing to pay higher prices.

Since most people tend to highly value picture quality when watching TV, LG’s decision to focus on OLED makes sense. Unlike LCDs, there are not that many giant fabs cranking out OLEDs and the supply/demand outlook for OLEDs looks much better than the one for LCDs. Manufacturers such as LG should be able to better sustain their margins in OLEDs and hence profitability. At least, on paper. TV panels are also the biggest source of demand for LG as the table below indicates. Panel segment 2018

To take advantage of OLED TVs, LG has invested over $4 billion to increase OLED production capacity. LG is currently conducting a test operation of its new 8.5G OLED fab in China with mass production expected to start in August. An LG official has stated to the media that “the operation of the Guangzhou plant will boost the production of glass substrates from 70,000 units per month to 130,000 to 160,000 units per month.”

An additional benefit of the new plant according to the same official is that it’s not subject to the export restrictions that Japan has recently imposed because the factory procures display parts locally. These export restrictions could potentially be a problem for LG in South Korea. But assuming that there are no hiccups with the new plant, LG will be able to drastically increase its supply of OLED TV panels in the very near future.

LG’s strategy looked sound when they first proposed it, but recent developments have cast some doubt on its viability. For starters, Chinese display manufacturers, BOE in particular, are making much faster progress with OLED than previously anticipated. If BOE continues to progress at its current pace, it may be able to flood the market with large OLED panels much quicker than previously thought. The production capacity of OLEDs is still nowhere near LCDs, but it’s something worth watching.

A second problem is a technological one. Chinese LCD manufacturers have come up with a new type of LCD technology. Manufacturers have figured out how to stack two LCD panels on top of each other and bond them together to create a level of picture quality that was previously unobtainable with LCDs. These dual-layer LCDs threaten the very advantage that OLED was relying on to sway customers towards buying an OLED over an LCD.

By bonding two LCD panels together back to back, manufacturers are able to display “real” black in an LCD. Something that is very important for picture quality as previously stated. The drawback of course is that by using two LCD panels instead of one, the cost goes up. In addition, more circuitry and chips are needed, which also raises costs. LCD TVs that incorporate this new technology will therefore be more expensive than traditional LCD TVs.

However, despite the extra cost of producing these new LCD TVs, they’re still expected to be cheaper than OLED TVs. An extra benefit is that since they’re LCDs, they do not suffer the problem of burn-in like OLEDs do. The first TV model using “BD Cell” LCD technology from BOE will be released by HiSense in the second half of 2019. If they can match OLEDs in picture quality at a lower price, then the future of OLED TVs may not be so bright after all.

Last year was not a good year for LG as the company ended the year with a loss. If one U.S. dollar equals 1180 South Korean won, then revenue and loss in 2018 came in at $20.6B and $152M respectively. A sharp turnaround compared to the year before when revenue and profit amounted to $23.6B and $1.6B respectively. Unit: million won 2017 2018

The slide has continued in the first quarter of 2019. LG reported $4.98B as revenue and a loss of $53M in Q1 2019. Considering the fact that panel prices have continued to go down in Q2, it’s almost certain that LG will report another loss for Q2. Hence the need for LG to find a new growth driver that can get the company out of the red. Unit: million won Q1 2019

LG has been banking on OLED TV panels for a turnaround, but that looks more and more unlikely. Instead, LG may get hit by a double whammy. Rival manufacturers in China are making faster progress with OLED and OLED demand may be reduced because LCDs remain a competitive option due to technological innovation.

If OLED is not the answer to its problems in the display market, then there is no reason to go long LPL even though the stock is at multi-year lows. All indications are that the worse has yet to come in the display market. LG will have to find another solution to become profitable again. OLED is unlikely to be it.

The display makers were accused of fixing prices on LCD panels that they sold to Chinese TV makers from 2001 to 2006. From the total amount of fines, $27 million was paid to nine TV makers as a refund, officials told Yonhap News.

"From 2001 to 2006, six companies involved held a total of 53 rounds of "Crystal Conferences," claiming that they exchange information on the global LCD panel market," an official with the National Development and Reform Commission said, according to Yonhap News. "Those involved turned out to have negotiated prices or manipulated prices, hampering the legitimate rights and interests of other parties and consumers."

A Samsung spokesman declined to comment to Yonhap. But an LG spokesman told the news agency that "to prevent a recurrence of such problems, LG Display has been mending policies and executing them, and remains committed to operating with compliance and transparency."

The decision released on Jan. 4, 2013 in China by the Chinese National Development and Reform Commission concerns LCD panel price-fixing between 2001 and 2006. We do not expect this decision to impact our relationship with customers or panel sales. LG Display remains committed to operating with full transparency in providing the best quality products and services to its global customers.

In 2010, LG, AU Optronics, Chimei InnoLux, Chunghwa Picture Tubes, and HannStar Display were fined around $856 million by the European Commission, which

LG Display and Samsung Display are struggling to find their ways out of the deterioration of their performance even after withdrawing from production of liquid crystal display (LCD) panels. The high-priced organic light emitting diode (OLED) panel sector regarded as a future growth engine is not growing fast due to the economic downturn. Even in the OLED panel sector, Chinese display makers are within striking distance of Korean display makers, experts say.

On Aug. 30, Display Supply Chain Consultants (DSCC), a market research company, predicted that LCD TV panel prices hit an all-time low in August and that an L-shaped recession will continue in the fourth quarter. According to DSCC, the average price of a 65-inch ultra-high-definition (UHD) panel in August was only US$109, a 62 percent drop from the highest price of US$288 recorded in July in 2021. The average price of a 75-inch UHD panel was only US$218, which was only about half of the highest price of US$410 in July last year. DSCC predicted that the average panel price in the third quarter will fall by 15.7 percent. As Chinese companies’ price war and the effect of stagnation in consumption overlapped, the more LCD panels display makers produce, the more loss they suffer.

As panel prices fell, manufacturers responded by lowering facility utilization rates. DSCC said that the LCD factory utilization rate descended from 87 percent in April to 83 percent in May, 73 percent in June, and 70 percent in July.

Now that the LCD panel business has become no longer lucrative, Korean display makers have shut down their LCD business or shrunk their sizes. In the LCD sector, China has outpaced Korea since 2018. China’s LCD market share reached 50.9 percent in 2021, while that of Korea dropped to 14.4 percent, lower than Taiwan’s 31.6 percent.

Samsung Display already announced its withdrawal from the LCD business in June. Only 10 years have passed since the company was spun off from Samsung Electronics in 2012. LG Display has decided to halt domestic LCD TV panel production until 2023 and reorganize its business structure centering on OLED panels. Its Chinese LCD production line will be gradually converted to produce LCD panels for IT or commercial products. TrendForce predicted that LG Display will stop operating its P7 Plant in the first quarter of next year.

Korean display makers’ waning LCD business led to a situation in which Korea even lost first place in the display industry. Korea with a display market share of 33.2 percent was already overtaken by China with 41.5 percent) in 2021 according to market researcher Omdia and the Korea Display Industry Association. Korea’s market share has never rebounded in for five years since 2017 amid the Korean government’s neglect. Seventeen years have passed since 2004 when Korea overtook Japan to rise to the top of the world in the LCD industry. Korea’s LCD exports amounted to more than US$30 billion in 2014, but fell to US$21.4 billion last year.

A bigger problem is that Korean display makers may lose its leadership in the OLED panel sector although it is still standing at the top spot. While Korea’s OLED market share fell from 98.1 percent in 2016 to 82.8 percent last year, that of China rose from 1.1 percent to 16.6 percent. Considering that the high-end TV market is highly likely to shrink for the time being due to a full-fledged global consumption contraction, some analysts say that the technology gap between Korea and China can be sharply narrowed through this looming TV market slump. According to industry sources, the Chinese government is now focusing on giving subsidies to the development of OLED panel technology rather LCD technology. On the other hand, in Korea, displays were also wiped out from national strategic technology industry items under the Restriction of Special Taxation Act which can receive tax benefits for R&D activities on displays.

LG Display is considering building a 7.5-generation LCD panel manufacturing line in China, the company"s senior executive told The Korea Times, Thursday.

``LG Display is seriously considering building the panel manufacturing line at there,"" chief financial officer (CFO) James Jeong said on the sidelines of the company"s second quarter earnings conference to analysts and investors.

The 7.5-generation panel line is optimized to produce medium- and large-sized LCD panels. In the first quarter of this year, TV consumption in the Chinese market quickened to upgrade to flat-panel TVs thanks to Beijing"s stimulus package.

As the lack of LCD panels led to a profit decline in China"s TV industry, Beijing is in talks with some leading panel makers for facilities in order to revitalize the electronic industry and transform the industry.

Japan"s Sharp will contribute its patented eighth-generation LCD technology to China by building that level fabrication line with the administrative and financial support from the Nanjing local government.

On a question over a possible technology leak issues, Jeong simply cut over such worries. ``After two or three years, 7.5-generation LCD technology will not be cutting-edge.""

At the meeting, the CFO has been in line with the market stance over a possible oversupply after the company decided to invest an additional 3.3 trillion won to expand its eighth-generation panel line.

SEOUL (Reuters) - Chinese flat screen makers, once dismissed as second-class players in the global LCD market, are drawing envious looks from big names such as LG Display Co Ltd and Samsung.An employee works inside a LCD factory in Wuhan, Hubei province, May 8, 2013. REUTERS/China Daily

While the Korean giants were busy developing next-generation organic light emitting diode (OLED) TVs, little-known Chinese companies have started selling a type of display that are sharper than the standard LCD and cheaper than OLED.

Until last year, the UHD market had been almost non-existent, with just 33,000 sets sold in the 200 million-unit LCD TV market. Since then, shipments have soared around 20-fold, thanks to China, data from research firm IHS shows.

Chinese consumers who want brighter and sharper images but can’t afford OLED screens made by LG and Samsung Display, a unit of Samsung Electronics Co Ltd, are turning to UHD.

But its slow introduction into the market and austere prices have thrown open a window of opportunity for UHD makers, in this case Chinese companies like BOE Technology Group Co Ltd and TCL Corp’s LCD unit CSOT.

By comparison, Japanese flat-screen pioneer Sharp Corp reported a razor-thin 0.5 percent margin. LG Display, the world’s No.1 LCD maker, posted a 5.6 percent margin.

Samsung Display, a unit of Samsung Electronics, had a margin of 13 percent, the biggest in the industry. But excluding its fledging OLED business, its LCD margin is between 3 and 7 percent, according to a Bernstein forecast.

“They’ve got also strong captive customers - Chinese TV manufacturers and a booming China market. It will take quite a while for Samsung and LG, which made a strategic mistake by ignoring the potential of UHD, to overtake them,” Nam said.

“Even with some expansion of the Chinese panel suppliers we do expect Samsung and LG Display to stay dominant and continue production in LCD,” said Sweta Dash, director at IHS.

While Samsung and LG Display are investing billions of dollars in OLED this year, the two giants are also broadening their product lineups to include more popular 50 to 60-inch UHD models.

BOE Technology is now planning to raise 46 billion yuan ($7.5 billion) in the biggest Chinese equity offering this year, to build panel production lines and increase its stake in its LCD venture BOE Display Technology.

LG Display has initially intended to halt LCD TV panel production in South Korea by the end of the 2020 while continuing production at its factory in Guangzhou, China.

LG Electronics was especially focused on procuring in-plane switching (IPS) LCD TV panels. LG Display specializes in the technology __ IPS allows for wider viewing angle and color range, as is used in premium LCD TVs.

LG Electronics initially expected that it could procure IPS panels from China’s HKC and Sakai SIO (previously Sharp). But COVID-19 delayed HKC’s ramp up of its H4, 8.6th-generation (2,250mm x 2,600mm) line in China. Sakai SIO in the meantime had difficultly procuring lasses for LCD panel production. Also, for HKC and Sakai SIO, Samsung Electronics is a more important customer than LG. These issues prompted LG Electronics to ask LG Display to extend LCD production.

LG Display produces LCD TV panels at its 7th-generation (1,950mm x 2,250mm) P7 line and 8.5th-generation (2,200mm x 2,500mm) P8 line at Paju. While both lines produce TV panels, P7 makes more of them compared to P8 which focuses on IT panels. Both lines are thought to have production capacities of 120,000 to 130,000 sheets per month.

The higher than expected demand for LCD also played a part in LG Display extending LCD production in Korea. In the third quarter, panel prices increased by 30% from the previous quarter. Price continues to go up.

Not only will P7 and P8 lines extend their production, they may have even higher operations rates than before. LG Display planning to react to demand flexibly.

Samsung Display has previously said it plans to end LCD production by 2020, it continuing to produce them. It has previously said it may extend production from Samsung Electronics’ request. Samsung Display specializes in vertical alignment (VA) LCD panels.

SEOUL, May 27 (Yonhap) -- China"s sweeping COVID-19 lockdowns are sending a shockwave in the display panel industry by exacerbating supply chain woes and parts procurement problems.

In April, global shipments of liquid crystal display (LCD) panels fell 15 percent from a year earlier amid the prolonged lockdowns in China, according to industry tracker Omdia.

China"s lockdowns have dealt a serious blow to the production of set products, which in turn is sending a ripple effect throughout the supply chain of parts, including display panels.

The company reported dismal first-quarter earnings last month, with its net income dropping nearly 80 percent from a year ago, on lower demand for IT products, falling TV panel prices and parts procurement difficulties.

Demand for LCD panels has been waning, as most countries have lifted pandemic restrictions and people spend less time at home and on personal IT devices. Enterprise demand has also been slower than expected, the company said, due to the hostile macro environment.

LG Display could "swing to loss in the second quarter for the first time in eight quarters, as LCD panel prices have continued to fall and sales of IT panels, the company"s core product line, fell more than 10 percent due to China"s COVID-19 situation," analyst Kwon Sung-ryul from DB Financial Investment wrote in his latest report.

This photo, provided by LG Display Co., shows Turkish-American artist Refik Anadol"s NFT collection, "An Important Memory for Humanity," on the panel maker"s transparent organic light-emitting diode. (PHOTO NOT FOR SALE) (Yonhap)

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LG Display has started mass-production at its second OLED panel production plant, the company announced Thursday. The new plant, located in Guangzhou, China, has the capacity to initially produce 60,000 OLED sheets a month, which combined with LG’s existing plant in Paju, South Korea means that LG Display’s total OLED production capacity has almost doubled to 130,000 sheets monthly.

According to LG, the panels produced at its new plant will be used to create displays ranging in size from 48 to 77-inches. They’re for TVs, in other words. LG Display is a major supplier of OLED panels for TVs across the industry. 19 brands, including LG, Vizio, Sony, Panasonic, Hisense, Bang & Olufsen, and Toshiba, use LG Display OLED panels in their TVs according to FlatPanelsHD.

The opening of LG Display’s new plant comes as it and competitor Samsung Display are shifting their attention away from LCD panels, which the majority of TVs currently use. LG Display announced earlier this year that it is ending production of LCD TV panels in South Korea, Reutersreports, while Samsung Display said it was ending LCD display production in South Korea and China.

LG Display’s CEO, James Hoyoung Jeong, said he hoped the new plant will “enable more rapid adoption of OLED displays in the market.” He called large OLED displays an “essential growth engine” for LG Display. LG Display says that production capacity could increased to 90,000 sheets a month in the future at the new factory.

By 2021, LG Display has said it wants OLED panels to make up 50 percent of its revenue, up from around 30 percent in 2018, according to Reuters. Samsung Display, meanwhile, is pinning its hopes on quantum dot, with ZDNet reporting that its future QD displays will incorporate an OLED panel rather than the LCD layer used by its existing displays.

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