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LCD price collapse drowns once-flying panel makers

Mass production by Chinese companies eats into profits at LG and Taiwan rivals

A glut of LCD panels, partly from Chinese producers, is dragging down traditionally dominant players like LG Display.   © Kyodo

SEOUL/TAIPEI -- Manufacturers of liquid crystal display panels have been hit hard by falling prices stemming from weak demand for TVs, and with Chinese players further ramping up output, the market's ill winds look unlikely to abate soon.

LG Display, the leader in large panels for televisions and other devices, suffered an operating loss of 228 billion won ($202 million) in April-June -- 2.3 times the previous quarter's loss -- on sales down 15% year on year at 5.61 trillion won, it said Wednesday. This marked the second straight quarterly operating loss. The South Korean company's January-March loss, its first in six years, was an abrupt turnaround from its record profit for all of 2017.

Panel prices "declined more than expected," said Chief Financial Officer Kim Sang-don. LG Display's average panel sale price sank 15% in the first half of 2018 to a roughly two-year low.

Meanwhile, Taiwan's AU Optronics reported a 13% drop in revenue in June compared with a year earlier. Its peer Innolux -- which counts iPhone assembler Hon Hai Precision Industry, better known as Foxconn, among its shareholders -- suffered a 12% decline over the same period.

But Chinese panel makers, backed by generous government support, are going on the offensive. The biggest among them, BOE Technology Group, began churning out LCD panels at a cutting-edge factory at the end of 2017.

The low prices plaguing LCD panel makers present a boon to TV manufacturers like Japan-based Sony and Panasonic, and the benefits may spread to consumers in the form of cheaper TVs. Some are holding off from purchasing new sets in anticipation of further supply growth, cooling down the market.

Global sales of TVs and smartphones appear to be reaching a peak after rapid growth in emerging markets. But "even if market conditions worsen, Chinese [panel makers] won't slow production," said Yoshio Tamura, Asia chief at U.S.-based Display Supply Chain Consultants. The glut will persist, Tamura predicted.

As the market retreats from last year's highs, major LCD panel makers are expected to shift their focus toward organic light-emitting diode technology, which device makers like Apple are increasingly adopting. LG Display said Wednesday it would make OLED panels at production lines now under construction that were initially meant for LCDs. The company is weighing converting some older-model production lines to make OLEDs as well. It will trim investment plans for LCDs by 3 trillion won over three years, it said.

Small and midsize LCD panels for smartphones, tablets and other devices are suffering a downturn as well. There are concerns that prolonged pain could affect companies focused on that segment, such as market leader Japan Display.

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