LCD woes and coronavirus help to send LG Display spiralling into its fifth consecutive quarter of loss
World slows down its smartphone buying for a bit
LG Display has reported its fifth consecutive loss-making quarter.
The South Korean manufacturer posted an operating loss of ₩362bn (about £237.5m), partially due to plummeting demand for TVs and smartphones as the coronavirus pandemic continues.
Calendar Q1 2020's loss is almost three times that of the previous year, when the firm ended up ₩132bn down (around £86.5m), but managed to beat the dreary expectations of analyst house Refinitiv SmartEstimate, which forecast a punishing loss of ₩390bn (£255m).
Overall revenue contracted 20 per cent to ₩4.7tn (about £3bn).
It's fair to say the current pandemic, which has disrupted supply chains and depressed consumer appetite, is not the stem of LG Display's problems – although it certainly hasn't helped matters.
Rather, the source of its woes derives from fierce competition in the LCD market, where it has had to contend with competition from cheaper Chinese manufacturers, paired with a supply glut of LCD panels that have pushed prices to unsustainable lows. This situation has prompted local rival Samsung Display to leave the LCD market entirely.
LG Display is actively trying to address this by divesting itself from LCD production as much as possible, in order to focus on more lucrative OLED displays, which it hopes will account for 50 per cent of revenue in 2021.
Earlier this year, it pledged to suspend domestic LCD TV production by the end of the year, limiting the remainder of its manufacturing to China, where labour costs are cheaper. At the time, LG noted it wouldn't convert its South Korean LCD line to produce OLED displays – suggesting the company plans to cut its losses by reducing headcount.
However, LG's lofty goals for OLED displays appear to be in trouble, with the company delaying the opening of a new Chinese factory originally due to open in Q1 2020 to the second quarter. This delay was a result of travel restrictions imposed by Beijing in an attempt to stem the spread of COVID-19, which ultimately prevented LG Display from deploying Korean technical experts required to start production.
One potential silver lining for LG Display is an increased demand for laptops, monitors and tablets caused by the recent trend for remote working. However, the firm bleakly noted that this is unlikely to offset the losses found in other markets. ®