Negotiation Stalled
Samsung Electronics and LG Display are remaining apart in liquid-crystal display (LCD) supply negotiation. LG Display was planning to supply TV LCD panels to Samsung Electronics from July. However, the supply is expected to postpone for quite a long time as the two have failed to sign the contract.
According to electronics and display industry sources on April 30, Samsung Electronics and LG Display planned to end discussing the supply and model of TV LCD panels and to conclude the supply contract by the end of March and early April at the latest, but the two companies haven’t reached an agreement yet.
Previously, Samsung Electronics was on the alert over the component supply-demand balance as Japan's Sharp abruptly informed Samsung at the end of last year that it will stop supplying 4.5 million LCD panels for televisions. Accordingly, the company had negotiations on the supply with Taiwanese LCD producers and LG Display. After it received a positive answer from LG Display, the two companies have been in negotiation. Once the two sign the contract, LG Display is supposed to supply 700,000 to 1 million LCD panels to Samsung Electronics from July.
However, industry watchers say that the two companies have failed to reach a conclusion and the negotiation has stalled. This is because they are heading in opposite directions.
As Samsung Electronics is now provided with different panels from another supplier, the company will need to change its specifications but it hasn’t confirmed any details appropriate for LG Display’s panels, such as resolution, power consumption and driver chip. The supply contract with LG is still being debated within the ranks of Samsung as well.
LG Display is also skeptical about supplying its panels to Samsung at the moment when large LCD panels are in high demand. In particular, the company can shoulder the burden of costs when it supplies LCD panels the way Samsung wants.
There was a definite difference of opinion between the two companies in negotiations. Samsung Electronics insists on the need for the conclusion of the LCD panel supply contract, while LG Display claims that signing a memorandum of understanding (MOU) is enough. Market watchers say that Samsung will not accept the MOU which doesn’t carry legal binding force.
As the two companies remain apart on the issue, the supply in July will be impossible. When the negotiation makes rapid progress, LG Display can supply panels to Samsung in September at the earliest. However, it will be too late for Samsung to release products before Black Friday, the biggest TV shopping day in the U.S.
Although Samsung and LG executives have decided to work together, not much progress has been made in the panel supply negotiation. Accordingly, LG Display Vice Chairman Han Sang-beom recently said the company should help even its competitors when they are in a difficult situation. Nevertheless, the display industry has doubts the executive ability of LG Display.
An official from the display industry said, “When discussing the supply of TV panels with customer companies, it takes a long time to apply quality tests and compatibility checks. If Samsung cannot produce products before Black Friday, the supply from LG is virtually meaningless.”