LG sees LCD market near bottom after weak Q3

LG sees LCD market near bottom after weak Q3

Seoul: LG Display, the world’s No.2 LCD flat screen maker, signaled the sector was nearing a bottom as the pace of panel price falls slows, after reporting its worst profit in six quarters.

The profit outlook remains grim for the liquid crystal display (LCD) sector, as TV makers demand price cuts to revive demand in the key year-end holiday season.

Shipment growth is also weakening as retailers are not keen to stock up on TVs and computers, worried about being saddled with inventory in a struggling global economy.

“The LCD market has hit the bottom, but it will take time for LCD makers to turn around. Their earnings will remain weak until the fourth quarter," said Song I-jin, a fund manager at Hi Asset Management said.

LG Display, which kicked off earnings for major Asian LCD makers including sector leader Samsung Electronics and Taiwan’s AU Optronics, beat market forecasts on strong demand from smartphones and tablets.

It expects the market to hit the bottom in the current quarter and gradually recover the following quarter.

““TV producers and other set makers are taking a cautious approach on weak demand, but inventory is returning to a normal level, and we expect the market to bottom out in Q4 and the overall outlook will improve from late in the first quarter of next year," LG Display chief financial officer Jung Ho-young told analysts.

LG controls about a quarter of global LCD TV market and closely follows Samsung, which has around a 27 % share on a revenue basis.

Shares in LG Display, run by chief executive Kwon Young-soo, ended 2 % weaker ahead of the results in a broader market up 0.2 %.

Media-friendly Kwon frequently talks of his desire to become No.1 in LCD manufacturing and had sent his staff to the world’s highest peaks such as Annapurna and Kilimanjaro to toughen them and ready to take on challenging goals such as being the No.1.

LG Display’s July-September operating profit came in at 182 billion won ($162.2 million) versus a consensus forecast of 150 billion won polled by Thomson Reuters I/B/E/S. The profit was the lowest for the firm since the first quarter of 2009.

Third-quarter profit was down 72 % from 662 billion won profit a year ago and showed a fall of 75 % from the preceding quarter.


Demand for LCDs turned weaker last quarter but LG Display outperformed rivals and showed strong shipment growth last month due to its supply deals with Apple for iPhone and iPad tablet, according to industry tracker DisplaySearch.

Analysts estimate LG Display has been running at 90 % of its capacity since August and rivals in Taiwan are making deeper cuts of around 20 %. But they may have to reduce output further due to faltering demand.

“LCD TV panel demand is as bad as it was during the financial crisis in 2008... The problem is that clients ask for big price concessions because they know about the oversupply situation," said DisplaySearch analyst David Hsieh.

The global LCD market has been in oversupply since July, with supplies in TV sector far outpacing demand by some 30 %, according to research firm iSuppli.

LG Display’s panel shipments rose 10 % in September from August, when delivery from Chimei and AU Optronics fell 3-4 %.

The company’s operating margins tumbled to 3 % from 11 % a year ago, hit by steeper-than-expected price falls for LCDs, which are now trading close to production costs.

Panel prices, which have fallen around 30 % on average from April to September, are set to decline further, as TV producers have aggressively cut prices to boost demand, increasing price pressure on most panel makers.

That’s a big concern for LG Display since TV panels generate more than half of the company’s revenue. It counts Apple and LG Electronics among its customers.

The shares have rallied about 23 % from a nine-month low hit in late August versus a 7 % rise in the market.