LG to Hike Panel Output From October
By Kim Yoo-chul
Staff Reporter
LG Display, the world's second biggest liquid crystal display (LCD) panel supplier, will normalize its LCD panel output from October despite continued weaker demand in panel-equipped electronics gadgets.
"We hope to end the months-long reduction in LCD production that began late July from October as we see clear signs of a rebound in demand thanks to aggressive cutbacks by Taiwan-based suppliers," CEO Kwon Young-soo told reporters in Beijing, China.
The remarks came on the sidelines of his participation in a panel forum with its bigger clients held in the Chinese capital last week.
The company said in late July that it will slash output by about 10 percent of total capacity and its factories in South Korea would remain underutilized until the end of August due to falling prices amid deteriorating demand.
Weeks ago, LG Display decided to extend the reduction period, citing a slow end-demand mainly due to deepening U.S. macro-economic troubles.
"It's very good for us because all of the leading Taiwanese LCD makers such as AU Optronics, Chunghwa Picture Tubes and Chi Mei Optoelectronics postponed investment plans for fear of suffering losses," Kwon said.
"Small- and medium-sized LCD panels for IT applications such as notebooks are lifting panel demand, while steady demand for handsets is also helping us maintain profitability," he said, adding that TV use is still sluggish, however.
LCD makers typically cut their factory utilization rates during the first half of the year when demand is weak.
But they have been forced to cut production even in the second half of this year as the usual pickup in electronics consumption, driven by back-to-school and holiday demand, has failed to meet expectations, hit by sliding economies in developed countries.
A cutback in utilization rates mean less supply, which will temper panel price reductions.
Although LG Display has revised down its third quarter operating target because of the worsening situation, the company now plans to push the operation of its newest eighth-generation LCD facility in the first half of next year as scheduled.
"We don't have any plan to delay the operation timing. It will be challenging us to compete with rivals by ramping up our eighth-generation facility. But that's an opportunity, as well," Kwon said.
An eighth-generation facility is well suited to produce LCD panels bigger than 50-inches.
Analysts say the rush by LG Display and other makers such as Japan's Sharp, as well as Taiwanese players, to build bigger and more efficient plants at a time when market demand is still weak could exacerbate a supply glut, bringing down panel prices even further.
Some say the LCD industry's recovery, previously forecasted for the second half of 2009, could be delayed to 2010.
Over the question on whether the company will suffer operating losses in the fourth quarter as analysts expected, Kwon simply changed tack by saying his company has now secured stable sales channels with bigger clients unlike 2006.
Also, Kwon admitted an earlier report by The Korea Times over a joint venture with Nasdaq-listed Cree in an LED-backlit packaging plant in China.
"Yes, we are discussing a possible joint venture amid growing demand for the component in notebooks and television sets."