Japanese TV Makers’ Heavy Investment to Weigh on Samsung

By Kim Yoo-chul

Staff Reporter

Over the past few years, Japanese TV majors have been bleeding from falling profits and losing shares, hit by weakening demand and a strong yen as well as the widening share gap with their biggest Korean rivals.

In order to boost the "bottom line," the Japanese have heavily shifted, hoping for rises in the demand for liquid crystal display (LCD)-embedded consumer products such as LED-backlit LCD TVs.

The strategic transition by Sharp and Panasonic, among those Japanese majors, are not good news for Samsung Electronics and LG Display ― the world's top two producers of flat-screens ― as increased outputs could make the industry to suffer from another oversupply.

"Boosted by the better outlook in the global consumer electronics industry and weakening yen against the U.S. dollar, Japanese TV makers are massively betting on their investments for flat-screens. That means more price competition with the Koreans," Park Sang-hyun, an analyst at a local brokerage of Hi Investment, wrote in a memo to clients, Wednesday.

Samsung and LG Display could hardly dispute that their market share gains against the Japanese rivals including Sony was partly due to the currency advantage.

Sharp and Panasonic is reportedly set to begin new LCD panel plants at full capacity this summer, accelerating their plans due to strong demand.

Citing the rising calls by its clients including Sony and Toshiba, Sharp's factory in Sakai ― Osaka Prefecture ― plans to double the plant’s capacity.

Panasonic is in the stage to start the operation of its plant in Hyogo Prefecture this month, three months ahead of schedule.

A representative of Sharp's Korean branch declined to comment, while the spokesman of that of Panasonic was also mum over updated details.

Samsung?

But Samsung Electronics, where being number one is an "obsession," is taking the Japanese' moves as another "stimulant" that will push the world’s top flat-screen vendor to strive harder.

Executives of key suppliers of Samsung Electronics' LCD business told The Korea Times they've already gotten orders to provide the equipment of Samsung’s new line in Tangjeong, South Chungcheong Province.

"To defy the aggressive moves by the Japanese rivals and to actively meet the rising demand for clients on screens over 40-inch sized, it seems quite evident Samsung will invest an additional 1.5 trillion won for a new line," a top executive of a local equipment company said.

A Samsung spokesman said, "It's true that we are seriously reviewing the possibility to inject more on flat-screens. But still, should Samsung narrow some technical matters before the final announcement."

But the spokesman added Samsung hasn't officially been ordered to domestic parts suppliers for the necessary equipment.

The visible plan means Samsung to finally join the ranks of LG Display and Japanese TV makers to expand the productions amid the popularity of LED-backlit LCD TVs, 3D TVs, notebooks and other consumer products that use LCDs as the key components.

But the aggressive investments by the sector leaders is causing worries over a possibly supply glut for large-sized panels later this year that would dampen the prices.

LCD panels are widely regarded as commodities and the business is cyclical, meaning the supply and demand chain is highly susceptible according to economic situations.

"Situations are favorable for Japanese TV makers, considering the stabilizing currency and hopeful macro signs. But we are not quite sure the current tight supply will continue by the end of this year," Park Hyun, an analyst at Prudential Securities said.

LCD makers had been mired in heavy losses since late 2008, due to falling demand for consumer electronics in the wake of the global economic downturn.

But they started to make a dramatic turnaround last year, mainly thanks to strong demand from China and a series of sports events worldwide.