LG Display, Cree of US part ways over LED chips
LG Display has terminated its contract with Cree for light-emitting diode (LED) chips used for the former's flat-screen products.
In January 2009, LG Display signed a memorandum of understanding (MOU) with the Nasdaq-listed Cree for it to supply LED chips, key components in value-added liquid crystal display (LCD) products
``The MOU with Cree has become meaningless for several reasons,’’ an LG spokesman said Monday.
A spokesman for U.S.-based Cree was not available to confirm the termination of the strategic alliance.
Market observers say that the measure is not surprising.
``The termination was widely expected as LG doesn’t need to pay more to Cree for LED chips. There are numerous players producing LED chips such as Taiwan’s Epistar,’’ said Eugene Kim, a senior analyst at Taurus Investment & Securities.
LG would be able to use patented LED chip-related technologies from other rising players at competitive prices, said Kim.
He noted that LED chip buyers such as LG can secure stronger bargaining power with chip providers staging patent wars including litigation as the LED market is set to take off.
LG officials told The Korea Times that the company also has a last resort as far as LED chips are concerned ― another reason why LG is willing to end the MOU with Cree.
``LG Group’s component affiliate LG Innotek is improving the production yields of its LED chips, which is another reason for LG Display to end the alliance with Cree,’’ said an LG official, asking not to be identified because he is not authorized to speak to the media.
As part of LG Display’s strategy to diversify its procurement channels for LED chips and LED-related businesses, it has also been running a joint venture with Taiwan’s Amtran Technology and the LED packaging house of Everlight Electronics China.
LEDs are regarded as energy-efficient, environment-friendly alternatives to the current cold cathode fluorescent lamp (CCFL) backlights, which are a significant part of LCD panels.
The global LED sector has been considered as lucrative, especially in niche markets such as the automotive industry. However, mass production of other LED products has so far been problematic due to high costs.
``It’s true that the LED market faced pressure from rising costs amid a continued oversupply as slow technological development was deterring LED chip makers. But the mid- to long-term outlook is seemingly quite stable, in consideration of the increasing demand for LED-backlighting,’’ said Kim of Taurus.
LG Display, led by CEO Kwon Young-soo and one of the top confidants of LG Group Chairman Koo Bon-moo, is injecting more resources to realize what it claims is ``business transformation’’ toward various sectors including LEDs.
Although LG Display is creating more revenue from parts-related businesses, the Seoul-based outfit formed alliances with set makers to jump into the markets for finished consumer electronics goods.
Kwon has proven himself as the right man in developing LG’s film-type patterned retarder (FPR) 3D technology and has helped LG see a larger proportion in the global 3D market, still led by its cross-town rival Samsung Electronics.