4th quarter profitability for LCD industries is facing dangerous state due to decrease in LCD (liquid crystal display) panels’ prices. It is an aftereffect where supply is not decreasing even though there are stocks of panels due to lack of demands for TVs. As panels’ prices continue to decrease due to oversupply, there is an increase in drop for profit ratio.
According to stock market on the 4th, it is estimated that 4th quarter operating profits for Samsung Display and LG Display will decrease by two-digits because prices for 32-inch LCD and 50-inch or higher LCDs, which are main models for Chinese panel manufacturers, have fallen.
According to investigation done by market research company called SNE Research on prices of panels in December, average price of economic HD 32-inch (open-cell) panel decreased by 6.9% compared to November that it is at a level where it cannot make profits anymore. Prices of large panels also have started to decrease as Chinese panel manufacturers have started to increase output of 50-inch and 55-inch after profitability for 32-inch model had started to decrease.
As there are many attempts to increase profitability through high-resolution UHD panels, prices of UHD panels have also started to decrease. Fact that set businesses adjusting stocks of panels as demands for TVs have started to decrease due to poor global economy also contributes to poor performance. Industries are predicting that decrease in prices of LCDs will continue until first half of 2016.
It is estimated that 4th quarter operating profit for LG Display was around $83.9 million (100 billion KRW) or fell under $83.9 million. It is total opposite of its 4th quarter operating profit in 2014 when it was $525 million (625.8 billion KRW). Compared to 3rd quarter operating profit of 2015, 4th quarter operating profit is about half of that or falls short.
As prices of LCDs had continued to decrease in 2015, operating profit for LG Display in 2015 had also continued to decrease as they were $624 million (743.9 billion KRW), $409 million (488.1 billion KRW), and $279 million (332.9 billion KRW) in 1st quarter, 2nd quarter, and 3rd quarter respectively.
A possibility of operating profit turning into deficit in 1st quarter of 2016 was also brought up. TVs and laptops could not take advantage of end of the year peak season, and prices of LCDs can continue to decrease until first half of 2016.
It is predicted however that there will be a turnaround starting from second half of 2016. A possibility that prices of LCDs will rebound again was brought up, and there are many expectations that TV OLED (organic light-emitting diode) panel markets will start to expand.
It is estimated that 4th quarter operating profit for Samsung Display will be about $336 million (400 billion KRW), which is about 30% less than value that was expected initially. It made $779 million (928 billion KRW) in operating profit in 3rd quarter due to rapid increase in supply of OLED panels for Smartphones, and there were many predictions that it would make about $587 million (700 billion KRW) in 4th quarter because of it. However because prices of LCDs have started to decrease faster than expected, possibility that its 4th quarter operating profit would be about half of 3rd quarter operating profit has gotten bigger.
Fact that demands for OLED panels for Smartphones are increasing is very optimistic. It has higher profit ratio than LCD, and there are not any key competitors that can supply OLED panels for Smartphones right away. It seems that Samsung Display will prepare for future as they maximize profitability of UHD LCD in large panel markets.
Stock market is predicting that operating profits for both companies will somewhat decrease in 2016. Decrease in operating profit due to decrease in LCD prices in first half of 2016 will impact their annual performances.
Staff Reporter Bae, Okjin | withok@etnews.com
