LG Display CEO paints rosy outlook

Many consumers hoping to buy sleek flat-screen TVs may be waiting until prices sink further due to the weak demand.

But it is time to buy TVs as panel prices, which had been in a free fall, hit bottom last month, said chief executive of LG Display, the world`s No. 2 maker of liquid crystal display panels.

In a meeting with reporters on Friday, Kwon Young-soo said LCD prices may rebound as panel makers have significantly cut production in late 2008, leading to a shortage in some panels.

LCD panels are found in almost every electronics product, including televisions, monitors, notebook PCs and mobile devices.

"Panel prices are expected to recover gradually after hitting bottom in December. But it is hard to predict how fast prices will go up," Kwon said.

"We do not expect that TV prices will go down. TV prices may rise."

He said electronics makers have significantly cut prices for televisions, which has spurred demand in major markets. Beijing`s expansion of its subsidy program for purchases of electronics goods has also helped revive sagging demand in China, he said.

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But prospects are uncertain as to whether panel prices will continue to climb as demand shows no sign of recovering due to the deepening economic downturn, analysts said.

LG Display also said it plans to boost output to 90 percent of its total capacity in the current quarter, which may raise the specter of LCD oversupply.

"Since there are not any significant increases in demand, it is not clear if price increases are sustainable. But for the panel makers this seems like the first ray of hope in a long time," David Hsieh, a researcher at DisplaySearch said in a report dated Dec. 31.

Excessive supply and weak demand have driven down prices since July, hitting margins. Panel prices have dived by as much as 45 percent since June, iSuppli said in a recent report, although it has recently stabilized.

LG Display on Friday reported its first loss in seven quarters, hit by tumbling panel prices and $400 million U.S. price-fixing fines. Its fourth-quarter net loss was 684 billion won ($504 million), compared with profit of 760 billion won a year earlier. Despite its record loss, LG Display`s shares jumped 5.7 percent amid hopes that panel prices may bounce back. The broader market rose 2.15 percent.

LG Display is expected to widen their losses in the first quarter of 2009 as the demand is expected to remain lackluster, analysts said.

This is a reversal of fortune for the display manufacturer, which reported a three-fold jump in quarterly net profit just six months ago.

As to monitors and notebook PCs, Kwon said although demand does not show signs picking up, panel orders will increase in the current quarter due to low inventories. He said electronics makers cut their inventories to "their lowest levels" due to the gloomy outlook and they may be aware that panel prices, which have dropped to below their cash costs, will not fall anymore.

Kwon also said the company, which has focused on televisions, monitors and notebook PCs, will expand into the mobile display business, tapping into the growing market for smartphones.

The company plans to invest in 577 billion won to build a new line to produce high-end LCD screens for mobile devices, using LTPS (low temperature polysilicon) technology. The company also plans to invest additional 2 trillion won this year.

"Smart phones are expected to account for 30 percent of all handsets in 2011. And we need the LTPS production technology to cement our position in the smartphone market, which is expected to grow rapidly," he said.

LG Display is also pushing for the thin-film solar cell business. Its parent company LG Group has proclaimed solar energy as one of its new growth engines and is getting ready to jumpstart the business.

Kwon said his company has found ways to improve the yield of solar cells from the current level of less than 10 percent.

"Given environmental problems, the solar market is expected to grow explosively within two to three years," he said.

He also concluded the meeting, saying the current downturn is an opportunity for two Korean panel makers to cement their market leadership. Samsung and LG Display rank first and second in the global LCD market.

By Jin Hyun-joo



(hjjin@heraldm.com)