Thursday, August 16, 2018
Spring is to Come for LG Display
OLED Business to Serve as Cash Cow
Spring is to Come for LG Display
  • By Michael Herh
  • August 8, 2018, 14:33
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LG Display is expected to turn profitable next year on the back of strong sales of large OLED panels
LG Display is expected to turn profitable next year on the back of a jump in sales of large OLED panels.

LG Display is suffering from a steady LCD price decline this year. From next year, however, its large OLED panel business is expected to serve as a cash cow for the company. LG Display said it would increase its production of large OLED panels to 10 million by 2021, but supply shortages are likely to continue.

Market researcher Euromonitor reported on August 6 that the global OLED TV market is expected to grow to 2.54 million units this year, 3.91 million units next year, 6.65 million units in 2020, and 9.95 million units in 2021. It was expected to grow to 20 million in 2023.

This is largely in line with the large OLED panel sales plan of LG Display, which is the world's only large OLED panel producer. LG Display is currently producing OLEDs at its Paju plant in Gyeonggi Province and plans to mass produce large OLED panels in Guangzhou, China in the second half of next year. It will ramp up production to 4 million units next year, 7 million units in 2020, and 10 million units in 2021. The market is expecting that the majority of LG Display’s products will be sold.

LG Display is anticipating a profit in the OLED business in the third quarter. The company's earnings are expected to improve from next year. According to FnGuide, a financial information provider, LG Display is expected to record an operating loss of 494.7 billion won this year, but is likely to generate a profit from next year. It is forecast to post an operating profit of 59.3 billion won next year and 825.2 billion won in 2020. LG Display plans to raise the proportion of OLED sales, which is currently about 10%, to 40% by 2020.

LG Display plans to produce up to 3 million large-sized OLED panels, which are significantly more than last year, but the market is still in short supply. World’s TV makers are lining up to launch OLED TVs.

Since LG Electronics first produced OLED TVs in 2013, Chinese companies such as Konka, Skyworth and Changhong joined to produce OLED TVs. Last year, more companies joined including Panasonic, Philips, Bang & Olufsen, Loewe, Metz, Vestel, Philips, Toshiba, and Hisense so currently there are 14 OLED TV producers. Sharp is also considering launching OLED TVs.

The rapid growth of OLED TV producers is attributable to strong earnings growth of OLED TV makers such as LG Electronics and Sony. LG Electronics' HE division is continuing its double-digit operating margin, and Sony has turned its TV business to surplus after starting to sell OELD TVs. While the overall TV market is stagnant, OLED TVs alone are growing.

The global OLED TV market, where LG Electronics ranked first with 74.9% last year, is also expected to change its landscape. With dominant makers settled in each market such as Skyworth in China and Sony in Japan, producers started a full-fledged price competition.

LG's OLED TVs, which surpassed 10 million won in 2013, dropped to 2 million won per unit this year, and Sony's new 55-inch OLED TV dropped from 4 million won last year to 2 million won this year. Demand for OLED TVs is expected to increase further due to price competition among TV makers.

An electronics industry official said, "The reason the industry has been in deficit was that the money invested in the production of large-sized OLED panels is so big. Currently OLED panels are in high demand. We expect the OLED business to turn profitable in the third quarter and will continue to grow afterwards.”

Meanwhile, the US and China are expected to drive demand for OLED TVs. The US OLED TV market, which was 500,000 units, is forecast to expand to 4.6 million units in 2021, and the Chinese market to 550,000 units in the same period.