| LG Display's plant in Guangzhou, China / Courtesy of LG Display |
By Kim Hyun-bin
Samsung and LG Display have decided to continue manufacturing LCD panels amid an unexpected boom in the market. LCD panels have been generating handsome profits until now, as manufacturers kept output relatively low based on erroneous forecasts that demand would remain weak during the COVID-19 pandemic. But an unexpected surge in demand for IT devices since last year sent prices of LCD panels shooting through the roof.
However, local manufactures who rely on LCDs are not all smiles, because of the skyrocketing prices amid the global chip shortage.
According to Display Supply Chain Consultants (DSCC), the price of LCD panels rose 27 percent year-on-year in the fourth quarter of 2020. The price of the component rose 14.5 percent year-on-year during first quarter of this year and is expected to rise 17 percent in the second quarter. DSCC projects panel prices to peak in the third quarter of this year.
Some speculate that it could be a good move to continue producing LCDs, because Samsung and LG will not have to make additional investments in R&D for more advanced panels.
Late last year, Samsung Display announced it would halt its LCD operations, but decided instead to continue producing the panels until the end of this year. LG Display, which was also set to stop manufacturing LCDs, also decided to continue production for the time being.
However, it is impossible for the Korean tech giants to win in a price war against Chinese rivals who can pump out cheaper but lower quality LCDs into the global market. Also, surging materials costs will only reduce the overall profitability of Samsung and LG amid the LCD boom.
Initially, Samsung and LG intended to focus on their next-generation displays. Samsung had its sights set on quantum dot (QD) displays, while LG was focusing on upgrading organic light-emitting diode (OLED) panels, while slowly reducing their reliance on LCD panels.
Prolonging the LCD display business could seem like a good move at present, due to the immediate handsome profits. But the move could also shift the focus away from swiftly transitioning to next-generation displays.
So is it the right move to prolong a dying sector just to make a quick buck? Only time will tell, but one thing for sure is that Chinese companies are catching up quickly.
Currently, Chinese firms are not in a position to match Samsung and LG's next-generation panels in terms of technology such as QD and OLED. But it is only a matter of time before Chinese firms catch up as they continue to invest heavily in the field and their endless efforts to brain drain Korean tech industry talent any chance they get. The Chinese government is also subsidizing panel makers, enabling them to flood the market with cheaper products.
It is time for Samsung and LG to focus more on widening the technological gap with Chinese rivals and secure a solid lead to fuel future growth rather than trying to make a quick buck.