LG Display is looking to start making operating profit from its OLED TV panels during second half of 2018. It is expecting that it will start making more sales and operating profit due to increased output starting from third quarter of 2017 and positive reactions towards premium panels. Although selling price of LCD panels dropped and growth of TV markets is unclear, its strategy is to increase its profitability by putting more weight on OLED.
LG Display announced at its third quarter earnings release that was held on the 25th that it is looking to start making operating profit from its OLED TV panel business during second half of 2018. It already started making surplus every month based on EBITDA (Earnings Before Interest, Tax, Depreciation and Amortization) since first half of this year and it believes that it has prepared foundation for it to start making operating profit by improving its productivity through increased output.
If it starts making operating profit from its OLED TV business, it is possible for LG Display to make annual surplus in 2019. This year, LG Display made tens of millions of dollars of losses every quarter from its OLED TV panel business.
It is expecting that percentage of small, medium, and large OLED panels out of entire sales will increase from 10% this year to 20% next year as its performance in OLED TV panel business continues to grow.
“We estimate that we will sell about 1.7 million OLED TVs this year and between 2.5 million and 2.8 million OLED TVs next year.” said Executive Director (CFO) Kim Sang-don of LG Display. “Because reactions from markets towards premium products such as wallpaper TVs and CSO (Crystal Sound OLED) TVs are very positive, these two products will be responsible for 30% of entire OLED panels in 2018.”
It is hoping to sell at least 6.5 million OLED TV panels in 2020 and it is planning to hold a better position when it comes to price negotiation and to maintain profitability by breaking current structure of LCD markets that repeat increase and decrease of panel prices and focusing on premium products.
Although it is expected that its OLED TV panel business will continue to grow, it is likely that its LCD TV panel business will continue to go through decrease in selling price and lack of demands. It predicted that uncertainty for LCD demands is high as China’s BOE is planning to start supplying its 10.5th generation panels in 2018 and as TV demands do not have any point for huge growth.
“Downward trend of price will slow down during fourth quarter of this year due to panel manufacturers making efforts to maintain their profitability and added end-of-the-year TV promotions.” said Executive Director Kim Sang-don. “However we expect that there will be a change in price from profitability rather than a change in selling price from supply and demand as amount of supply of panels will increase in 2018 and as demands are uncertain.”
LG Display is estimating that it will start to make sales from small and medium 6th generation flexible OLED panels in 2018 and make even more sales in 2019 when its investment starts to be finalized. It is expecting that it will start to make somewhat of sales this year and either maintain or see its sales grow by a bit next year.
Since center of mobile display markets has shifted to flexible OLED, LG Display is also starting to make preparations to convert its LTPS (Low Temperature PolySilicon) LCD production lines into flexible OLED production lines.
“We are currently preparing to convert our LTPS LCD production lines according to speed of growth of plastic OLED markets and demands from our customers.” said Executive Director Kim Sang-don. “However we are currently focused on extending new lines step by step and stabilizing them.”
On this day, LG Display announced its third quarter performance, which was somewhat higher than values estimated by markets that had worried about effect of price drop of panels.
As number of shipment of small and medium mobile products increased from shipment of OLED TV panels and seasonal busy season, it made $6.18 billion (6.9731 trillion KRW) and $520 million (586 billion KRW) in sales and operating profit respectively this third quarter. Its sales and operating profit increased by 4% and 81% respectively compared to third quarter of last year. However compared to previous quarter, its sales and operating profit decreased by 5% and 27% respectively due to price drop of LCD panels.
Staff Reporter Bae, Okjin | withok@etnews.com