By Kim Yoo-chul

LG Display is cutting investment for LCD production in China in order to concentrate on the OLED business. Samsung Electronics is also moving in the same direction.

A glut is putting pressure on LG to migrate into more profitable displays.

``It doesn’t make any sense that LG is continuing to make big investments in its LCD-making facilities in China,’’ said a high-ranking LG executive, who is familiar with the situation.

“We have decided to halve investment in our China factory to less than 2 trillion won," he said asking not to be identified as he wasn't given the right to officially speak to the media.

``LG will invest more on OLED panels with the savings,’’ he said. He expects the same for Samsung Electronics.

LG is talking with several brokerages with the goal of borrowing up to $300 million to fund its OLED business, company sources said.
It plans to start its first LCD factory in southern China in 2014.

LG had planned to invest over 4.2 trillion won to construct an LCD plant. Gary Sohn, LG Display’s public relations official, declined to comment.

In Samsung’s case, the situation is not much different.

LCDs are no longer a cash cow because China is also shifting to OLEDs instead of serving as a buffer to absorb LCDs while Europe and the United States are also in transition.

Samsung had planned to invest around 3 trillion won for its LCD factory but Samsung officials say the amount will be cut by more than 30 percent.

For Samsung, however, building an OLED plant is not an option at the moment.

``We can’t construct an OLED panel-producing plant in China due to the risk of a technology leak,’’ said a Samsung official, adding that if it decides to build one, it would be on a slower track.

The firm terminated a joint flat-panel venture with Sony in a bid to rein in its manufacturing costs. Its display panel business swung to an operating loss of 750 billion won last year on revenue of about 29 trillion won, a slight drop from 2010.

``Profitability for our LCD business is eroding,’’ he said. Samsung spokesman Ken Noh declined to confirm whether it plans to slash its investment in China.

Still, forcing the hand of Korean technology firms is Beijing’s move to increase import duties on LCDs.

China is threatening to double the tariffs to 10 percent in the second quarter of this year, meaning the two firms as well as their competitors would have to build factories in China or face higher duties.

``If Beijing approves the tariff hike plan this time, a number of traditionally-strong LCD exporters to China including LG and Samsung would lose competitiveness in prices,’’ the Samsung official said.

Since 2010, China has emerged as the world’s biggest LCD TV market. Chinese LCD makers such as BOE and CSOT are already running advanced LCD panel lines.