The global display industry is expected to suffer from a supply glut due to slowing TV demand hit by a consumer shift towards portable devices such as smartphones and tablets, according to the chief executive of the country's leading display company.
Han Sang-beom, CEO of LG Display, the world's biggest manufacturer of LCD displays, stressed that the company plans to guard against further oversupply by investing more in premium products.
"The entire display industry is going to see further instances of oversupply in the near future. We are worrying about next year," Han told reporters at an industry forum in the Grand InterContinental Hotel, southern Seoul, late Tuesday.
Han said the top global supplier is feeling a sense of urgency, pushing it to conduct various scenario-based simulations before implementing measures to overcome looming market uncertainties.
"There is the expectation that the global economy will improve next year. But my stance toward the market is somewhat negative," said the top executive.
Profitability of the LCD business depends on macro-economic moves. The LCD business is highly-cyclical and very volatile.
Consumers do not upgrade their computing devices or purchase new ones if economies are in trouble, directly hitting LCD suppliers. LCDs are used in everything from PCs to smartphones.
The display industry is confronting the prospects of weak sales growth and a lack of visibility into future demand trends. For example, Chinese TV manufacturers are suffering from large inventories due to weak TV sales.
DisplaySearch, a leading market research firm, expects the TV industry will contract by 4.8 percent this year in terms of revenue from 2012, extending its losing streak for the second consecutive year.
Given the deterioration of exports and the stagnant global economy, China can no longer depend on exports to fuel its overall economic growth, increasing its support to leading Chinese panel makers such as BOE and CSOT.
Han said LG Group's display-making affiliate will maintain flexibility in investment in facilities next year. But he stressed it won't be "overly aggressive" on expansion.
"We will invest in projects that need investment. There won't be any schedule change for the operation timing of our plant in southern China. The plant will go online as scheduled, however, the intensity of, and expansion in production will be decided according to market situations."
LG is currently building a massive LCD factory, the world's largest in terms of annual production capacity, in Guzngzhou. LG earlier planned to invest a total of $4 billion.
As a "Plan B," LG plans to expand its LCD lineup that supports ultra high-definition (UHD) viewing in a strategic shift to put more focus on value-added and premium displays.
"Currently, we are selling high-end UHD displays. The lineup will be expanded to low-end starting from early next year," said the executive.
UHD panels are considered premium products like OLED displays as TV makers believe UHD and OLED displays are the next cash-generators that will replace the industry's current LCD mainstream.