Korean LCD makers emerge as worlds top brands
Technological edge, big investment creating more chances
By Chung In-jae
Chief technology officer, LG Display
In 2009, LG Display and Samsung Electronics emerged as undisputed leading brands, dominating more than half of the global LCD market, and surpassing competitors from Japan and Taiwan.
However, the beginning of Korean LCD production was humble.
Its exceptional growth was the result of a pioneering spirit and the urge to meet new challenges, an aggressive investment strategy and innovative development of technology.
As newcomers, LG Display and Samsung Electronics needed to take bold action to break the Japanese companies' dominance and secure a stable position in the industry.
The two companies opted to make daring investments and discover new market opportunities.
In 2000, LG and Samsung launched the world's first fourth-generation (G4) LCD production lines. The G4 ``fabs,'' optimized for producing 15-inch monitors, were the symbol of innovation that changed the paradigm of the industry.
Technology development
The LCD industry was still in its early stages in the late 1990s and panels were only considered as an application for below 14-inch notebooks.
Due to high costs at the time, the industry was skeptical about obtaining technology to profitably produce 15-inch and above LCDs.
PC makers also resisted the idea of replacing PC monitors, which were at the time mostly 15-and 17-inch cathode ray tubes (CRTs), with expensive LCD panels.
It was the G4 fab that broke down the industry's negative perception and technology barriers.
Under the firm belief that LCD monitors would become a popular market choice, LG and Samsung proceeded with investing in G4 lines and pooled their resources in developing production technology and monitors.
Moreover, they presented a vision for the future of the LCD market to PC makers.
Early investment in the fourth-generation LCD technology and the launch of 15-inch LCD monitors were a turning point for Korean makers in gaining momentum to lead the global market.
Pioneering opportunities helped Korea take over the G4 investment initiative and market leadership from Japan in 2002.
The investment was significant in that it not only proclaimed commitment to pioneering new markets, but was also a very bold move ― 1998 was a difficult year as a financial crisis hit Asia.
However, LG decided on a 1.4 trillion won investment. This smart strategy was crucial in the Korean LCD industry's ascendancy in the global marketplace.
Later in 1999, LG Display successfully attracted $1.6 billion from Philips Electronics of the Netherlands to launch LG.Philips LCD.
It was the single largest foreign investment at the time. Meanwhile, Samsung partnered with Sony to create S-LCD in 2004.
These joint ventures expanded investment potential and paved the way for stable sales, thereby solidifying their foothold in the market.
Following their success in the PC monitor business, LG and Samsung began expanding into LCD TVs.
In August 2004, LG started full operation of a sixth-generation production line (G6) to manufacture large LCD TV and monitor panels. Then in January 2007, mass production began at the seventh-generation production line (G7).
As a panel maker with both G6 and G7 lines in operation, LG was able to firmly establish its leadership in the LCD TV market.
A decade after the first mass production at Gumi, LG Display became the global number one in the large LCD market, claiming a 22-percent market share in the first half of 2005.
The Gumi site also evolved into Korea's largest LCD industry complex boasting a total of six panel factories from G1 to the world's first G4, G5 and G6 production lines.
In particular, LG Display's Paju Display Cluster and Samsung Electronics' Tangjeong site, equipped with fabrication lines to roll out large LCDs, are called the ``Mecca'' of the display industry and are global leaders.
LG and Samsung, partners in creating new market opportunities and leading the industry, are also fierce rivals, competing to take the world number one spot and to develop better products and technology.
When LG introduced the world's first 52-inch LCD in 2002 and 55-inch in 2003, Samsung responded with the world's first 57-inch LCD. In 2005, Samsung Electronics developed an 82-inch LCD, while in the following year, LG successfully showed off its 100-inch LCD panel, a feat long considered an impossible barrier for LCD technology.
Stronger client base, China factor
Compared to their counterparts in Taiwan and Japan, Korean firms have secured a stable customer base that includes the world's leading TV, PC and appliance makers.
In particular, LG Display is expanding sales of premium high-profit products in the notebook PC segment while strengthening sales of large high-end products in the monitor segment.
LG is also leading the large-sized LCD TV market. In the application segment, the company is seeking market diversification to include mobile phones, car navigation, aviation and medical devices based on a solid customer base.
Korean firms are pursuing a more aggressive approach to win market share in China and Europe.
The strategy is to set up and reinforce an optimal global production system through localization in China and other LCD markets.
Since 2008, LG has been pursuing such a strategy in the emerging markets of Brazil, India and China (BICs).
By promoting the excellence of its technology, the company has successfully captured the hearts of customers in BICs.
To realize the new paradigm that ``panel technology can directly influence TV purchasing trends,'' LG is breaking away from the traditional mold of B2B, which focuses on production to leverage marketing, once considered an inherent area of B2C firms, as an important strategy.
According to market survey firm DisplaySearch, China is poised to become the world's biggest LCD market after 2011, with demand for panels surpassing that of North America and Western Europe.
Accordingly, China's local governments are working hard to attract panel plants with huge added value and job creation effects.
LG, Samsung and Japan's Sharp are all actively seeking new market opportunities there as they plan construction of seventh- and eighth-generation production lines.
Korean LCD makers are also leading the pack in customer satisfaction. Customers worldwide have named Korean firms the best in customer satisfaction numerous times.
Korean-made products were also selected as Best Displays of the Year at global academic symposiums.
Credited export items
Today, the global display industry is carefully scrutinizing every move made by Korean LCD companies.
According to statistics released by the Ministry of Knowledge Economy, information technology (IT)-related products accounted for 35 percent of Korea's total exports in 2009. Of total exports of $350 billion, IT exports amounted to $120 billion.
Mobile phones, semiconductors and LCDs made up almost 76 percent of all IT exports.
For flat panel displays including LCDs and OLEDs in particular, the sector is posting a steep rise in exports. It surpassed semiconductor exports of $31 billion to record $31.2 billion.
As a process industry, LCDs are a driving force behind the growth of related industries such as the materials and parts sectors.
As such, the LCD industry is an indispensable engine for Korea's economy. LG Display's former CEO and Vice Chairman Koo Bon-joon current CEO Kwon Young-soo were honored with the ``Gold Tower Order of Industrial Service Merit Awards'' in 2006 and 2009, respectively, for their contribution to making Korea a global display powerhouse.
LG and Samsung are also working hard to become global leaders in a supplier partnership.
For localization of equipment and parts materials, the two share manufacturing technology and R&D expertise with partner firms to help them secure a competitive edge in technology and price.
LG has set up a department dedicated to promoting win-win partnerships with suppliers.
The goal is to instill a spirit of teamwork in suppliers and forge a long-term relationship essential to proactively carrying out related tasks.
As a result, LG Display's G6 in Gumi which started mass production last year has succeeded in localization of such core equipment as coaters in the TFT process, sputtering in the CF process and CPS in the cell process.
This raised the equipment localization ratio to 60 percent, 15 percent higher than G6.
A successful win-win partnership between LG and its suppliers is leading to substantial improvement in the localization ratio.
Not only LCD equipment firms, but other Korean companies enjoy solid positions in markets for LCD TVs and materials/parts markets including polarizing panels, glass substrates and backlight units.
It may be said that the entire global LCD industry, both upstream and downstream sectors, is under the influence of Korean firms.
3D TVs, LED-backlit LCD TVs sweeping
In 2007, Korea's LCD and set makers including LG Display, LG Electronics and Samsung Electronics as well as equipment and material related firms created the Korea Display Industry Association (KDIA) to spearhead advancement of the Korean display industry.
Former head of Samsung Electronics LCD division Lee Sang-wan served as the first chairman of KDIA.
Since 2009, LG Display CEO Kwon Young-soo leading the association to achieve win-win outcomes for the country through R&D support, localization of core materials/equipments, development of next-generation displays like flexible/OLED panels and green products.
The goal is to strengthen the competitiveness of the Korean display industry as a whole.
The major talking point in the LCD TV market last year was the LCD panel with an LED backlight.
This was first applied to early notebook panels but is expanding the scope of application and has been adopted for LCD TVs, where the emphasis is on function and design. The adoption led to explosive market growth with LG and Samsung leading the way.
Similarly, Korean firms are leading the 3D TV market which stormed early this year's Consumer Electronics Show (CES).
On the back of successful mass production of 3D LCD panels for TVs, LG Display is readying itself to lead the 3D LCD market.
In the third quarter of last year, LG unveiled the world's first PR-type (Patterned Retarder, polarized glasses) full HD 240 Hz 47-inch 3D LCD TV panel.
The following December, LG Display launched the world's first SG (Shutter Glasses)-type full HD 23-inch 3D LCD TV panel using proprietarily developed 3D controller.
The company is leading the market by unveiling the industry's first LCD using both passive polarized (PR) and active shutter (SG) 3D technologies.
OLED, flexible screens topping future
Moreover, Korean makers are gearing for the future by pursuing new growth drivers such as OLED, e-paper and solar cell.
Samsung Mobile Display (SMD), for instance, is focusing on next-generation OLED displays.
The company is reportedly reviewing investment plans to expand OLED production lines to predominate the market.
LG Display also announced plans for OLED production line expansion to a monthly capacity of 8,000 sheets (based on 730x920mm glass substrates) by the latter half of 2011.
To this end, the company announced investments of about 250 billion won.
This would expand the monthly capacity of Paju OLED production line to 12,000 sheets (1.5 million 3-inch panels) by the second half of next year.
Work is now underway for the production line for a monthly capacity of 4,000 sheets ― in mass production in the third quarter of this year.
Starting this year, LG Display plans to actively pursue the mobile OLED market including smartphones. By the latter half of 2011, the plan is to preempt the large market with the launch of 30-inch OLEDs for TV.
The long-term strategy should position the company as the market leader to continue Korean makers' dominance in the next generation display market.
LG was the first in the industry to develop flexible panels and colored e-paper.
On the strength of such technological edge, the goal is to become the global number one by 2012.
In the area of thin solar cells, LG Display plans to develop high-efficient, long-life technology with an energy conversion efficiency of 14 percent and life cycle of 25 years by 2012.
To this end, the company will set up a fifth-generation pilot line within this year to build solid infrastructure for full-scale operation.
In the 30-year old panel market, Korean LCD makers were once treated as an ugly duckling in the shadow of their Japanese companies and faced difficulties in the mid-2000 due to the success of Taiwan's late starters.
Adding to the hardship were continued cycles of oversupply and undersupply which led to repeat boom and bust cycles, and the seasonality effect.
However, Korean firms gained strength unlike any other companies as they weathered those difficult times.
The result is a phenomenal success story. In 2009, LG and Samsung led the $93 billion large-sized LCD market, accounting for a 23.5 percent and 22.2 percent market share each.
There is speculation that the industry has reached its limit, much like certain semiconductors, for further growth.
However, increasing demand for above 50-inch TVs, expanding new markets for public displays and economic growth in emerging markets of Brazil, India and China will give the Korean LCD industry yet another opportunity for differentiated growth.