LGD lost for two consecutive quarters, plans to cut LCD spending and switch to OLED

- Jul 26, 2018-

LG Display recently revealed that the company achieved a net loss in the second quarter of 2018. In a regulatory filing, LG Display said that the net loss for the period from April to June was 300.5 billion won (about 267 million US dollars), while the profit for the same period last year was 736 billion won.

 

At the same time, during the period, LG Display's operating loss was 228.1 billion won, while in the same period of 2017 it was 804 billion won. In addition, in the second quarter of 2018, the company's sales also decreased by 15.4% year-on-year to 5.6 trillion won.

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It is understood that LG showed a loss due to the uncertainty of the global panel industry, coupled with the expansion of production capacity of Chinese companies, resulting in panel prices falling, the company's profits contracted. The structural oversupply of the panels and the fierce competition between manufacturers may continue.

 

At the same time, due to concerns about the poor performance of the global smartphone market, LG Display announced that its investment plan before 2020 will reduce 3 trillion won (about 2.7 billion US dollars), but did not disclose the previous capital expenditure target. The company also warned that they may adjust production in South Korea and China to cope with the current international situation. Reuters believes that reducing investment plans indicates that the company is bearish on the market outlook.

 

LG Display Finance Minister Don Kim said at the telephone law conference that the market for the mobile market is unclear, and capital expenditures are now conservative, but this does not affect the plan to accelerate the transfer of LCDs to OLEDs, which means being cut down. Capital expenditures are concentrated on the LCD business.

 

Jin Xiangdun said that the price of the panel fell in the second quarter, and the downstream brands were conservative, which made the second quarter's operating performance not satisfactory. In the future, LGD will continue to improve the differentiation of technology and products, such as IPS wide viewing angle, narrow bezel, and high-end technology such as Oxide TFT. In addition, it will also adjust the product portfolio to expand the large-size TV panel and commercial display panel business to respond to the panel. The industry is oversupply and the new normal.

 

LGD expects the third quarter OLED panel is expected to begin to contribute profit, but because LCD panels still account for more than 90% of LGD revenue, the replacement process is bound to drag down financial performance. In addition, LG Display is also worried about the impact of the Sino-US trade war, and will adjust the panel output in South Korea and China depending on the situation.

 

LGD's new production lines currently under construction include the 10.5-generation OLED TV panel factory in Paju, South Korea, and the 8.5-generation OLED TV panel factory in Guangzhou, China.

 

Looking ahead to the panel industry in the third quarter, Jin Xiangdun said that the panel shipment area will grow by 5% compared to the previous quarter. As for the panel price, the price of TV panels has stopped falling in July, and some sizes are also expected to increase prices. The operating conditions in the third quarter have an opportunity to improve.