After witnessing a Q2 operating loss of 228 billion won ($202.1 million USD), LG Display has said plans to plummet its investment on conventional display business by $2.7bn the amount it plans to invest by 2020.
LG Display is the world’s second-largest display maker by sales which hinted towards the last uncertain outlook for the global smartphone market.
“LG Display will invest Won3Tn ($2.7bn) less than originally planned by 2020 by adjusting the timing and amount of investment while continuing to speed up the shift toward an OLED-focused business,” said Don Kim, chief finance officer.
“It is a conservative approach resulting from uncertainty around the mobile market,” Don Kim, LG’s chief finance officer, told an earnings conference call, referring to the capex reduction.
Kim Young-woo at SK Securities said the bulk of the investment reduction would be made in small-size OLED panels used in high-end smartphones, with Samsung Electronics still the exclusive supplier of OLED panels for Apple’s iPhones.
“Investors are disappointed by the continued supply glut with Chinese LCD makers ramping up capacity,” said Mr Kim at SK Securities. LG Display’s net loss widened to Won300.5bn in the April-June period from a Won49Bn loss in the previous quarter, reversing from a net profit of Won736.7bn in the same quarter a year earlier. Second-quarter sales fell 15.4 per cent to Won5.6tn. The company expects its lossmaking OLED business to finally turn a profit in the third quarter as more television makers in Japan and China begin to use OLED panels for their premium TVs.
Kim, the CFO, said LG Display expected prices of some LCD panels to increase in the third quarter, but analysts said any rebound would be shortlived. “Both the TV and smartphone markets are not in good shape. The company will probably post smaller losses in the second half because of the panel price recovery and the weaker local currency, but they will worsen again next year,” said SK Securities’ Kim.
Plans to invest about 20 trillion won in OLED panels by 2020 remained unchanged, meaning the cuts would apply mainly to LCD operations.
Alongside, LG Display will not change the speed at which it shifts from LCD to OLED panels. Currently, 90% of LG Display’s sales come from LCD screens.
China recently approved an LG joint venture to run a new OLED factory there, as the company tries to expand its OLED business towards Chinese TV makers.