Samsung desperate to jolt LCD business

By Kim Yoo-chul

Memory chips and liquid crystal displays (LCDs) have been the two biggest breadwinners for Samsung Electronics over the past two decades.

Semiconductors and LCDs accounted for some 70 percent of the firm’s sales last year, while the two divisions combined to account for about two thirds of its profit, according to data from Korea Exchange.

But one of the two pillars is showing signs of weakening lately due to lackluster demand for LCDs amid the rise of rival products such as organic light-emitting diodes (OLEDs).

On an even more negative note for the LCD division, Samsung Electronics itself appears to be turning its focus away from it.

``Top management agreed that the LCD business won’t be a big cash-earner anymore and Samsung will put its top priority on OLED panels instead,’’ said a source familiar with the issue Friday.

Samsung, which has an OLED joint venture, Samsung Mobile Display, spent a total of 5.5 trillion won on facilities during the first three months of this year, but only 1.4 trillion won went to LCDs.

The company refused to elaborate on the topic but many industry watchers estimate that a good part of the reduced LCD investment will head toward OLEDs.

``Conventional LCD panels are low-margin commodities but OLEDs are gaining steam across the board with the debut of many sophisticated digital gadgets which employ them,’’ the source said.

OLED panels boast of better display resolution and other advantages, but failed to become mainstream products earlier due to their high price tag.

But things are expected to turn around with the increasing popularity of smart devices. Picture brightness and quality of viewing are becoming the No. 1 criteria when people pick these products.

As The Korea Times exclusively reported, Universal Display of the United States said its key phosphorescent material patents needed in OLEDs are being challenged in Europe and Korea after two such patents were invalidated in Japan.

``That is a very good news for Samsung in terms of its OLED business as it can accelerate development without paying heavy royalties,’’ he said.

Murky forecasts

Such unfavorable market conditions are further cornering the LCD division’s desperate efforts to maintain its bottom line. Securities analysts were cutting their targets on Samsung due to a decline of the business.

The division, led by President Chang Won-kie, has held emergency meetings with his executives even on Saturdays for pending company issues, a Samsung official said.

"It is true that the situation is very bad," he said.

A Samsung spokesman declined to confirm this, citing sensitivity of the matter, that a major reshuffle of executives of Samsung’s LCD business is ``highly likely.’’

The LCD division has fallen under the control of Samsung’s visual display division, a different department that mainly handles TVs.

Bank of America-Merrill Lynch cut its target on Samsung Electronics to 1.2 million won per share from 1.3 million citing the continued poor performances of the LCD business.

Samsung is building a $3 billion LCD plant in southern China with production expected to begin in early 2013 as China is set to become the world’s biggest consumer electronics market, nudging past countries in North America.

``But the bottom line is that Samsung intends to tap into a large-sized OLED market eventually for TVs within the next three years. Its LCD business and facility in China will be tasked to meet local demand in China. That’s the strategy,’’ a fund manager in Seoul said.