Money for OLED
LG Display Co., a flat panel maker in South Korea, reported a record quarterly operating profit of 904.3 billion won (US$775.23 million) in the fourth quarter of 2016, largely thanks to the increase in large-size liquid crystal display (LCD) panel prices. However, the company has decided to concentrate the investment in organic light-emitting diode (OLED) business for the future, instead of high-end LCD panels, which can make money at the moment.
LG Display announced on January 24 that it posted 7.94 trillion won (US$6.8 billion) in sales and 904.3 billion won (US$775.23 million) in operating profits in the fourth quarter last year. Its sales increased 6 percent from 7.5 trillion won (US$6.43 billion) a year earlier, while its operating profits rose a whopping 1,392 percent on-year from 60.6 billion won (US$51.95 million).
LG Display Chief Financial Officer (CFO) Kim Sang-don said, “The rising demand of large LCD TV panels and favorable exchange rates led to much bigger operating profits than we expected.” According to the company, 38 percent of sales in the fourth quarter came from displays for televisions; 31 percent from displays for mobile devices; 17 percent for laptops and tablets; and 14 percent for monitors.
Accordingly, LG Display’s total operating profit last year was 1.31 trillion won (US$1.12 billion), surpassing the 1 trillion won (US$857.27 million) level for a fourth straight year, and its sales reached 26.5 trillion won (US$22.72 billion). However, the company’s annual sales dropped 6.6 percent from 2015, while its operating profits decreased 19.3 percent. This was largely due to the performance slowdown caused by a rise in panel prices at the first half of last year.
This year, however, LG Display, which made a good showing with large-size LCD panels, will focus on its OLED business. The company plans to invest some 5 trillion won (US$4.29 billion) in facilities this year, and put 70 percent of the investment into securing large and small and mid-size OLED manufacturing facilities. Kim said, “LG Display’s panel supply will decrease a few percent in the first quarter this year because of the conversion of LCD plants into an OLED production line, new technology research and development (R&D) and reduction of operated days.”
LG Display puts the popularization of large OLED panels first. Once the plant and equipment investment is completed as scheduled this year, the company’s monthly production capacity of TV OLEDs will be doubled to 60,000. This is the capacity that can produce 1.5 million to 1.8 million large-screen televisions a year. In particular, LG Display said, “Our OLED panel achieved the industry’s golden yield of 80 percent. This year, we will expand our customer companies with our new product, crystal OLED, and solidify our leadership in the high-end OLED TV market.”
The company will also accelerate the production of small and mid-size OLED panels for smartphones. It plans to start operating the E5 production line in Gumi, North Gyeongsang Province, in the third quarter this year in order to produce the sixth-generation plastic OLED or POLED. In addition, beginning this year, LG Display will aggressively expand OLED to business-to-business (B2B) market, including commercial displays (signage) and automotive panels.
The company’s strategy is contrary to that of Chinese firms, such as BOE and China Star Optoelectronics Technology (CSOT) which make an investment in the 10th generation super large LCD facilities or higher. In this regard, Kim said, “After considering the movement of Chinese firms and various technical reviews, we will decide on our investment strategy by the end of the first half of this year.”