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LG Display expects improved fiscal performance in the second half of 2016
As OLED becomes poised to explode into the market, companies like LG Display are no doubt concerned as to what will happen with the future of LCD sales. While the company has regained its position as the head of the pack, and more affordable televisions may indeed continue to be primarily LCD based for the foreseeable future, things may ultimately change when it comes to smartphones and, to a limited extent, tablets.
The first quarter of 2016 saw not only LG Display, but also Samsung, report lower income due to decreased demand for LCD television panels. A new report out of Korea however, indicates that LG is optimistic for the short-term future. According to Han Sang-beom, LG Display’s CEO:
There is a sign of things changing a bit starting in late second quarter…We are making various cost-related efforts and I think we’ll look a bit better in the second half.
Reuters reports that, according to research firm IHS, LCD panel prices for televisions, tablets, and monitors increased this past June, signaling a possible end to the declining prices of the panels in recent quarters. LG in particular has been hard hit, and “is expected to post a 96 percent fall in April-June operating profit to 18 billion won ($15.72 million), according to the average forecast of analysts in a Thomson Reuters I/B/E/S/ survey,” according to Reuters.
Also adding to the agitation? Unprecedentedly low sales for Apple’s iPhone, the likes of which have prompted some to predict it may be a trend that repeats in the future. As far as LG is concerned, this year’s iPhone products, likely to be called the iPhone 7 and iPhone 7 Plus, are expected to be the last to use LCD displays. Countless reports point to 2017’s offerings sporting OLED displays – primarily made by Samsung – to go along with what is expected to be a major redesign to commemorate the product’s 10th anniversary.
Indeed the OLED trend is undeniable, as according to Reuters, “Han said flexible organic light-emitting diode screens were proving popular and LG Display was preparing to supply them to “major” Chinese clients for mobile products. He did not elaborate.” This was followed up with another comment by Mr. Sang-beom:
It’s clear that plastic OLED is a major trend. While the smartphone market has stagnated it is still a growth market, so we will focus on preparing capacity and developing products accordingly.
The news is, for the moment and no doubt a relief given that LG Display’s Q1 2016 operating profit saw a 95% decrease from the same period in 2015, and the poorest in the past four years. At the time, LG reported that Q1 panel shipments by surface area declined 7.7% compared with Q4 2015, and the average selling price declined 17%. As a result, a larger priority was given to making larger sized displays (60 inches/152cm or greater) that allow for greater profit margins than their smaller siblings.
While LG was once rumored to be making OLED panels for Apple’s upcoming iPhone, it is currently unknown – at least based on leaks – if this is still the case now. At one point there may have been a bidding war of sorts allegedly going on with Samsung and LG both trying to vie for the rights to handle main manufacturing. If the company does indeed get a contract, it could mean a stable source of income for years to come, though obviously not for LCD.
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