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LG Display may try to increase capital

Despite its recent decision to drastically cut investment, LG Display, the world’s leading LCD-maker, will have a hard time fending off a paid-in-capital increase, according to industry sources.

“Everything will weigh on how the company finishes the year, because at the end of the year, the chances are that LG Display will still be in a tight spot and may have to opt for a capital increase,” said one source on the condition of anonymity.
Kwon Young-soo
Kwon Young-soo

Unless LG Display is able to come up with more cash or find a strategic partner to supply the much-needed funds, a capital increase may be evident, possibly as early as next year, he said.

Some experts had expected the company to commit up to 1 trillion won ($948 million) increase within this month. The amount is exactly the amount the company slashed its investment for this year ― to about 4.5 trillion won from 5.4 trillion won.

The company so far denies harboring plans for the capital increase. But if the CEO’s words are something to go by, the situation looks bleak, especially due to a continued downturn in LCD prices amid sluggish demand for televisions.

The concern over diminishing demand is causing LG Display to become reticent about breaking ground for its 8th-generation LCD plant in Guangzhou of China.

During a press conference last week after LG Display logged lackluster second quarter results, CEO Kwon Young-soo admitted that the company faces “unprecedented uncertainties.”

He also said he was clueless as to when the company would swing into the black.

The end of the year is the earliest that the company can project positive growth, Kwon added.

Industry sources believe LG Display will likely supply its “Retina” LCDs for Apple’s third-generation iPads, but market watchers point out that it won’t be an easy job considering the costs involved.

“It takes about 1 trillion won to just maintain an assembly line, let alone increase the capacity of an existing one, which will require another 1 trillion won,” said Kim Young-woo of HMC Securities.

LG Display also plans to start manufacturing 55-inch televisions fitted with OLED displays, but this is another money-burning business that requires extensive investment―money LG Display does not have.

Experts noted that under current cash conditions, LG Display will not be able to invest properly in OLED, thereby dragging down the quality.

It has already declared its decision to drop out from the race for manufacturing OLED displays for smaller, mobile devices.

By Kim Ji-hyun (jemmie@heraldcorp.com)
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