By Kim Yoo-chul
Samsung Electronics is moving to reduce investment in its liquid crystal display (LCD) unit as the firm has shifted the focus of its screen business to organic light-emitting diode (OLED) and plastic-based flexible displays.
The move comes as the world's biggest flat-screen manufacturer has realigned its business as the conventional global LCD industry is still facing higher panel supply due to an increase in retail inventories caused by a slowdown in consumer purchases amid the global economic uncertainty.
''The real problem is that major television markets like the United States remain sluggish. This is much worse than display-making manufacturers expected. In contrast, the demand for tablets is increasing and that market will see further explosive demand growth next year,'' said one official from Samsung, requesting anonymity.
Rather than spending more on large-sized LCD screens, the display-making giant has sped up its move to shift some of its existing LCD lines for televisions to those better fitted for tablets. It plans to inject more cash in small, medium, and large-sized OLED screens.
''The global LCD industry is seeing signs of a major shift as Samsung is spending less on conventional LCDs. With money saved from LCD restructuring, the firm plans to spend more on OLED and flexible displays. Profitability is the top priority for Samsung's display-making business next year,'' said an executive from one of Samsung's key local parts suppliers by telephone on Monday.
''Because the LCD industry is approaching full saturation, Samsung, as well as its biggest rival LG Display, is expected to lower investment for its LCD plant in southern China. The reason is simple. LCD is no longer a cash generator,'' said another senior executive from a Samsung subcontractor.
As of the end of the first nine months of this year, Samsung invested 3.7 trillion won on displays including OLEDs and LCDs, according to figures that Samsung filed with the Korea Exchange (KRX). In January, Samsung said it planned to invest 6.6 trillion won in displays for 2012.
Market analysts and fund managers that put display-related stocks on their investment portfolios have no doubt that the company is going to restructure its money-losing LCD business to put more focus on OLEDs and flexible screens.
The latest data indicates that sales during typically strong third and fourth quarters in the United States, the single biggest market for flat-screen TVs, are suffering amid a slower-than-expected economic recovery.
''That's why Samsung plans to cut its workforce at its LCD-making division capitalizing on ranking executives. The layoff portion would be around 7 to 8 percent of the total,'' an industry source said asking not to be named.
Samsung is set to invest as much a 6 trillion won next year mainly for the promising screens. The source said the firm is going to allocate just some 1.8 trillion won for LCDs.
Samsung Electronics, the biggest shareholder of its display-making affiliate of Samsung Display, is pushing the sales of its OLED-embedded Web-connected Galaxy line of devices, meaning the group's OLED business will receive more attention from top management and attract significantly-increased investment.
Samsung Electronics is working on the Galaxy SIV, which will be introduced in February's Mobile World Congress (MWC). The Korea Times was the first to report the new Galaxy plan.
In a related note, the world's biggest technology company has been developing the Galaxy Note III with a 6.3-inch screen using an OLED display, according to officials from a local parts suppliers, while the company will start the first commercial sale of 55-inch OLED TVs from late next year.
In a recent year-end reshuffle of top management, Samsung replaced the head of its display unit with technology expert Kim Ki-nam, a former chief of Samsung Technology Center.
''We can't resist but to actively respond to the new market trend. We will invest in conventional LCDs. But the investment amount won't be too high. Restructuring is under way.''