LG goes all-in on OLED – Halves LCD manufacturing

Tighter margins are now causing LG Display to halve LCD production by 2020 and accelerate the shift to OLED.

South Korean LG Display is a clear world leader in producing OLED-type panels, which are used by sister company LG Electronics as well as everyone else selling OLED TVs at present. Earlier in the year, LG also opened a new factory, effectively doubling the world’s OLED panel capacity.

The company has previously announced that it intends to focus on OLED panels. In connection with this year’s third-quarter report, CFO Seo Dong-hee announced that LG will focus on what it does best and “streamline” (as in “cut down on”) the rest. Now The Elec reports that it will halve LCD production by 2020.

We plan to downsize at the P7, P8 LCD TV factories in order to focus more on our strengths and streamline what’s necessary.

Analyst IHS Markit forecasts that LG Display will deliver up to 48.6 million LCD panels in 2019, a figure that is expected to fall sharply by as much as 44 percent to 27 million in 2020. Globally, LG Display is expected to be the second largest LCD panel supplier for TVs this year – second only to Chinese BOE – but expects to fall to spot number fice in 2020, behind BOE, CSOT, Innolux and HKC.

The production cut will mainly affect LCD panels for TV sets, where LG Display is facing increasing difficulties with its profitability. However, the company will continue to build LCD panels, but just for phones and other panels, including displays for laptops and tablets.

Outwardly, LG is happy to talk about the benefits of OLED and that the transition is mainly about a technology change. A major reason why the company is now speeding up the transition is that the Chinese government is injecting money into domestic LCD production, which has led to overcapacity and squeezed margins globally.

While OLED panels are a growing segment of LG Display, LCD revenue is still three times greater in 2019. Next year, OLED is expected to account for 60 percent of revenue. IHS Markit expects OLED sales to reach 3.25 million units this year, which is projected to increase to 5.5 million in 2020 and 7.1 million in 2021.