LG Display sees dramatic turnaround next year
CEO Kwon expresses confidence about ‘smart’ displays, OLEDs
By Kim Yoo-chul
LG Display, the world’s biggest flat screen maker by shipments since the third quarter of this year, is aiming for a rapid business turnaround from next year propelled by rising calls for its advanced and premium displays from technology companies.
Although a slump in global demand for LCD-embedded digital devices was threatening LG’s bottom line this year, the company’s chief executive Kwon Young-soo still has big hopes for an upturn in its display-making business amid moves to adopt LG’s in-house 3D-viewing and IPS-oriented displays.
``Since this year, consumers were passive on either buying or upgrading their electronic products with the economic situation clouded by increased uncertainty and financial volatility. But such idling demand will recover from the year-end at the earliest or from early next year,’’ said Kwon.
LG reported its biggest-ever quarterly losses of 492 billion during the July-September period this year mostly due to plunging panel prices amid weak demand.
For display makers, panel prices are regarded as decisive factors in gauging profitability. While demand is high under stable economic times, panel makers see more revenue as they can charge buyers more.
When panel prices fall under bleak economic conditions or shift, then manufacturers usually suffer from falling profits, resulting in a cut in their factory output and them selling products below market price.
The LG executive is taking an optimistic view to a slowdown in panel-price declines next year, citing major sporting events such as the 2012 Summer Olympics in London.
According to Kwon, chances are low that the global flat screen market will remain weak and continue the current sluggish demand.
``LG Display is preparing for the worst. One inspiring signal is that TV makers are promoting what I can say are `affordable TVs’ with lower prices, which is good to help markets revive. In Europe, inventory levels are also normalizing,’’ he said.
Edges in advanced displays
A positive market outlook boosts LG Display’s confidence because it has good technology and many products.
LG Display, affiliated with LG Electronics has been using its fine-tuned processing technologies to produce premium panels.
Advanced High Performance In-Plane Switching or AH-IPS displays and its film patterned retarder (FPR) 3D flat screens are regarded as ``killer products’’ and the panels have steadily been expanding their presence to top-tier technology companies abroad since the release.
``In China, LG Display has risen to the biggest 3D display maker and our FPR 3D flat screens are also receiving favorable reviews from the United States, the world’s top consumer electronics market. LG has no doubt that FPR 3D will soon become the industry standard,’’ said Kwon.
``What clients want is our top priority. We should know what they really want. FPR 3D TVs and AH-IPS displays are customized products that reflect clients’ needs.’’
LG Display, which already supplies AH-IPS screens for Apple’s iPhones and iPads, has been in talks with PC majors such as Dell of the United States, Taiwan’s Acer and Fujitsu and Toshiba of Japan to supply AH-IPS panels for ``ultra-thin notebooks’’ to be offered by them next year.
``LG wholly met tougher requirements from customers such as thinner displays, low power consumption, faster processing speeds and competitive pricing and that’s impressive,’’ said a fund manager from a Europe-based investment bank in Seoul, who has added LG Display shares to the bank’s portfolio.
``We’ve applied cutting-edge technologies that have never been used before. LG Display has adopted `panel self refresh (PSR)’ technology for the first time for more power savings,’’ said Gary Sohn, the head of LG’s public relations office.
The late Apple co-founder Steve Jobs once praised LG’s AH-IPS as ``Retina Display’’ as Jobs believed its viewing quality reached the level of human retinas in distinguishing pixels.
In the world of smartphones, viewing quality is a critical factor as well as content and download speed. LG is battling its biggest rival Samsung with AH-IPS against OLED displays.
LG executives have reached a consensus that AH-IPS panels are better positioned than Samsung’s OLEDs in terms of clarity, readability and sharpness.
The LG AH-IPS displays have 300 pixels-per-inch (PPI), better than Samsung OLED’s 270 PPI for mobile devices. Resolution is decided by the total number of pixels whereas image crispness is measured by PPI, which commonly refers to pixel density per unit area.
In terms of pixels, AH-IPS is recognized better by the human eye at a typical distance.
``With our own research and various surveys, we’ve reached a consensus that AH-IPS displays are ideally suited in the world of smartphones. Major smartphone makers including Taiwan’s HTC will release phones with our AH-IPS displays,’’ said Kwon.
In 3D-viewing technology, LG is drawing more partners, which helps it gain investor confidence.
LG’s FPR panels are cheaper than the battery-powered ones by Samsung, resulting LG receiving more ``supplement calls’’ from firms such as Sony, Panasonic and Hitachi as well as its existing Chinese partners.
``The world’s third-biggest LCD maker, Taiwan’s AUO, is also mulling the possibility to join the LG Display-led FPR 3D camp. If it does, then LG’s bottom line will soar,’’ said Kwon Seong-ryol, an analyst at Dongbu Securities, forecasting the portion of premium panels in LG’s total shipments will rise to 70 percent next year.
``That’s why we have no big doubts over LG’s business in 2012,’’ Dongbu’s Kwon said.
On the roadmap for OLED TVs, which will eventually replace LCD sets, the LG Display chief executive has a plan for their activation by gauging the investment timing.
``Consumers are not ready to pay big premiums to buy pricey OLED televisions, which are seen to make their commercial debut in the second half of next year. We will invest after analyzing consumer responses. Thanks to the steady investment for research and development activities, LG Display has the technology to quickly release competitive OLED TV models,’’ said the CEO.
Citing LG’s credentials to fully manage premium products and a stronger client base with top-tier overseas technolgy firms, market analysts suggest LG is in a better position than most to weather the economic downturn with the financial backing that the firm has from its parent group than competitors in countries such as Japan and Taiwan.
Park Sang-hyun, an analyst at KTB Investment, expects LG to see a turnaround in profit within the first half of 2012 as a local brokerage believes panel prices are stabilizing with the approaching year-end demand.
DisplaySearch, a market research firm, said LG Display had a 28.7 percent and 28.3 percent market share by shipment and revenue respectively during the third quarter of the year, making it the world’s biggest LCD manufacturer.