Murky strategy

Samsung, LG in shift to OLED screens in China

By Kim Yoo-chul

The landscape of the global TV industry is changing. Sets with liquid crystal displays (LCD) and even plasma technology are being phased out, as ultra-thin and brighter organic light-emitting diode (OLED) technology is gaining popularity.

Still, there are many technological hurdles and price-related problems before use of this highly-advanced technology is fully adopted. Despite such challenges, major TV producing firms are desperate to shift their focus to OLED TVs.

``The formula is simple. The LCD TV market is already overcrowded and that means they will be phased out because they are no longer generating profits. The market needs a new engine and OLED TVs are emerging as the best option,’’ said Samsung Electronics Consumer Electronics Division Chief Yoon Boo-keun.

``Whoever can mass produce affordable OLEDs will have a head-start and gain a strong competitive edge over rivals,’’ said Yoon, who is the right-hand man of Samsung CEO Choi Gee-sung.

Samsung and LG, the world’s top two producers of flat-screen televisions, have already confirmed they will introduce credit-card-thin OLED TVs in Europe and the United States in the latter half of the year as a ``litmus test.’’

Attention is being shifted on whether or not the South Korean firms can stick to their earlier strategies in China as the companies have begun building their latest LCD plants in the southern part of the country.

Chances are low that Samsung and LG will produce large-sized LCD screens at the plants. ``Yes, may shift our LCD-making facilities to lines that produce large-sized OLED screens for use in TVs,’’ said a high-ranking Samsung executive.

Samsung Display earlier said it has started construction of its eighth-generation LCD factory in Suzhou with an initial investment of $3 billion. But it declined to say when the plant will begin operating.

``Samsung’s first China LCD plant will shift to OLED lines from the latter half of or early 2015 as the company believes the market will open a few years later,’’ said the executive.

After the transition, it could produce various sizes of OLED screens; currently they are being used for small-sized digital devices such as smartphones and tablets.

``If Samsung changes its LCD factory in Suzhou to one manufacturing OLEDs, the Chinese government will welcome us as Samsung will be the leader in OLED technology in terms of production capacity,’’ said the executive.

The situation for LG Display shows little difference. LG Display will have a groundbreaking ceremony on May 22 to build its first China plant in Guangzhou. Like Samsung, LG plans to change the focus of the factory to produce OLED screens, according to LG executives.

Apple is LG Display’s most important customer. It uses LG’s LCD technology in its popular i-brand devices, however, there are possibilities that the California-based company may also use displays supplied by Samsung.

LG’s China plant will play a key role as its cutting-edge LCD factory could also be switched to produce small-to-medium-sized OLED screens for use in notebooks and tablets.

``This is all about customers. If customers want, then we do it,’’ said a senior LG official, adding the firm could change its plant in Guangzhou to an OLED screen line depending on the circumstances.

LG Display spokesman Gary Sohn declined to comment.

The companies will delay the operation of the LCD plants until the demand for OLED TVs becomes stable,’’ said Park Young-joo, a senior analyst at Woori Investment and Securities.

For makers of OLED displays, that boast sharper images and do not need backlighting, the obstacle to consumer acceptance is price.

Consumers can buy 10 LCD TVs for the likely price of $10,000 for a big Samsung or LG OLED model, meaning LCDs are likely to remain the dominant force in the global TV market for a while. ``Our internal studies indicate that consumers will start buying OLED TVs once the price falls to 1.3 to 1.4 times that of an LCD set,’’ said an LG executive.

Paul Gray, a senior researcher at Display Search, agreed to the ``murmuring strategies’’ adopted by Samsung and LG. ``OLED still has many technical problems to solve even before capacity investments are considered. Only 50,000 OLED TVs will be shipped this year and 5 million are forecast for 2015,’’ he said at a recent conference in Europe.

But Jurgen Boyny, global director of consumer electronics at GfK, a research company, said growth will be driven by emerging markets with China leading the way.

With Samsung and LG, Japanese TV giants Sony and Panasonic are on a joint quest to bring down the cost of large OLED displays.

Analysts and officials say an alliance between the Japanese TV makers could lead to cheaper mass-production of OLED TVs possibly from late 2014 _ when Samsung and LG plan to put their flat-screen lines in China on line.

“The Japanese need the capacity, while the Taiwanese need outlets. Japan has the technology, but may not necessarily be able to implement it. So it’s a match," said David Hsieh, Taipei-based Greater China market vice president at DisplaySearch. “Because Japan's scale is smaller, it has to work with Taiwan.’’