By Kim Yoo-chul
Staff Reporter
LG Display, the world's second-largest liquid crystal display (LCD) panel supplier after Samsung Electronics, said Sunday that it will reduce its total output capacity by 10 percent until the end of August to slash rising inventories amid weaker demand.
"We've begun scaling back LCD production at our plants in Gumi, North Gyeongsang Province, and Paju, Gyeonggi Province, from Saturday," its spokesperson Park Sang-bae told The Korea Times, Sunday.
"We are aiming to reduce panel production by around 10 percent. By implementing this latest measure, we hope the current supply and demand imbalance will be eased," he said.
LG Display officials say July and August are vacation seasons in its key markets of North America and Europe, meaning less demand for products and a supply glut in the global LCD industry.
"Production will return to normal levels from September when the supply and demand imbalance will improve, boosted by back-to-school season orders," Park added.
The decision comes a few weeks after its CEO Kwon Young-soo suggested the possibility of cutting panel output if market conditions worsen significantly.
Citing the bleak outlook in the market, Kwon said output cuts may be used as an opportunity to clean up facilities and improve yields. He expects the shortage of IT panels to come from September, helping IT panel prices to rebound after a sizable fall in July and August.
The outlook for leading LCD panel suppliers will deteriorate further in the coming weeks because of slow end-demand caused by the U.S. economic troubles, plummeting TV sales in China and high oil prices.
Panel suppliers said that most downstream customers were asking for advancing delivery dates in the first half because of worries about a panel supply shortage in the second half. But the worse-than-expected global economy drove the downstream customers to be more cautious toward inventory levels.
The price for a mainstream 19-inch LCD panel for a computer monitor is forecast to drop another 7 percent to $107 per unit in the latter half of this month from two weeks ago, according to market search firm DisplaySearch.
Meanwhile, the average price of a standard 32-inch LCD panel for large-lot buyers has declined 1.6 percent to $310 since the end of May and 6.6 percent form the January high of $332, DisplaySearch said.
In order to combat falling profits amid rising inventories and falling panel prices, Taiwan's AU Optronics has reportedly cut utilization rates by 5 percent to 10 percent in July, while Chi Mei Optroelectronics recently decided to cut such rate by 10 percent to 15 percent, reducing glass-substrate production at 3.5-generation, 4-generation and 5-generation plants.
"Such moves by leading LCD panel suppliers to cut production will help ease the current supply glut in the industry from the fourth quarter of this year," Lim Seung-beom, an analyst at Hanwha Securities.
But attention is being focused again on whether Samsung Electronics will join the production cut rally although its IR chief Chu Woo-sik told the paper that the company is not considering cutting LCD production, last week.
"Almost all LCD TV panel orders in the second half are already booked. Currently, we are receiving orders exceeding our production capacity by 30%," Chu said, adding Samsung and Japan's Sony are buying 85 percent of the total LCD panel output.
"We are monitoring the bearish price moves of IT panels. However, it's unlikely to cut production of LCD panels as we could shift IT panel lines to TV panel lines, if necessary," a high-ranking Samsung official said.