By Kim Yoo-chul
Samsung Electronics, the world's No. 1 maker of liquid crystal display (LCD) screens, said Monday it has been lowering its panel output by around 5 percent since August to cope with excess inventory amid lackluster demand from global markets.
The Suwon-based technology giant now joins its Korean and Taiwanese rivals LG Display, AU Optronics Corp. and Chi Mei Optoelectronics Corp. in a rare move to reduce production and ease an oversupply as the global panel market conditions deteriorate faster than expected.
"We are maintaining flexibility on panel production and the output reduction is 5 percent of our total capacity," a Samsung spokesman told The Korea Times, adding the company has kept in line with current demand and supply moves on the market.
Earlier, its head of investor relations team Chu Woo-sik said his company was not considering lowering production as it had secured enough orders from bigger clients including Sony.
But industry watchers and Samsung insiders said a steep price decline and weaker demand for PC monitors because of slowing demand hit by the global economic slowdown were pressuring Samsung to tackle rising inventories.
"Inventories need to be balanced for the time being," the official said adding, the decision doesn't necessarily mean a sudden policy change in its panel business.
"Samsung's symbolic moves will help the global LCD market return to short-term balance," a high-ranking executive said, asking not to be identified.
"The production cuts by Samsung will help speed up the digestion of inventories. But the effect will be limited," said a local analyst.
Demand for LCD panels mostly used in mobile phones, computers, television sets, is typically strong in the third quarter as consumers are busy buying the gadgets during the back-to-school season and holiday shopping periods.
However, for this year, leading LCD manufacturers have failed to meet their "bullish" expectations as high inflation, a massive earthquake in China and consumer-spending cuts in the United States dampened demand.