Posted : 2008-12-10 16:51
Updated : 2008-12-10 16:51

LG to Downsize Plasma Panel Output

By Kim Yoo-chul
Staff Reporter

LG Electronics will downsize its money losing plasma display panel (PDP) business, including scrapping its 32-inch PDP line from next year.

"LG has engaged in detailed internal talks to completely halt production of the 32-inch panels starting from 2009 to cut costs and improve profitability," a high-ranking industry source told The Korea Times, Wednesday.

"As far as I know, LG plans to convert its A3-1 plasma panel-manufacturing line in Gumi, North Gyeongsang Province, into one for more profitable panels over 50-inches with full high-definition viewing quality," the source added.

The source, however, asked not to be identified due to the sensitivity over the issue.

An LG Electronics spokesman declined to give detailed comments, however, he said "nothing has been decided yet."

Analysts and industry officials have generally agreed the time is "very near" for LG to massively restructure its PDP business, considering profitability due to the narrowed price gap with advanced liquid crystal display (LCD) television sets as the turmoil in global economies spreads.

Last year, LG Electronics CEO Nam Yong said his company will seek "business optimization" in running its PDP plants to increase profitability.

"The utilization rates of LG's whole PDP lines was below the 70 percent level as prices for its 'niche' 32-inch PDP panels have plummeted," John Soh, an analyst at Goodmorning Shinhan Securities, said adding LG should increase the portion of over 50-inch panels in the business to boost competitiveness

"Almost half of LG's PDP output are 32-inch panels. That's the size at which price competition is most extreme," according to Soh.

Leading brokerages said things could worsen quickly due to problems faced by the entire flat-panel industry. Consumers are now tightening their purses and prices for even LCD panels are slipping.

PDP technology is on the wane as consumers have picked LCD TVs as their flat panel of choice, and companies are moving on to the next, new panel, such as the next-generation of organic light-emitting diodes (OLED).

LCD TVs use less electricity than PDP TVs and are better in bright rooms. They are also more affordable in smaller sizes.

LG's investor relations team chief Brian Sohn said in a conference call upon third quarter results that LG was expecting the 32-inch portion was going to decrease "rapidly" in the second half.

"I was wondering whether the 32-inch plasma strategy is 'viable' going into 2009 due to oversupply and less demand for the sets," he said at that time.

LG initially received an enthusiastic response of its 32-inch PDP sets capitalizing on emerging markets such as Brazil, Russia, India and China (BRIC) after it introduced the set early this year.

LG was hoping the set would gain steady growth momentum because of prices and possible demand from the Beijing Olympics. But the deepening economic troubles dragged down the prices of LCD TVs, causing LG to be faced with oversupply and profit deterioration.

LG's display division, which makes plasma display panels and flat-screen TVs, posted an operating profit of 1.6 billion won in the third quarter, compared with 3.8 billion won in the second quarter.
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