Tit-for-tat over OLED technology continues

Models promote LG Electronics' OLED TV. / Courtesy of LG Electronics

By Baek Byung-yeul

For years, LG Electronics has pushed hard to improve sales of thinner and brighter organic light-emitting diode (OLED) TVs in a bid to find new growth engines, as Chinese rivals flood the LCD market with cheaper products and catch up to market leader Samsung Electronics.

LG has said its OLED technology is a better choice for consumers who want to enjoy a sharper picture quality, but its efforts to promote the products seem to have hit a snag as the company is recalling its OLED TVs to repair power board components due to a possible heating risk.

LG announced recently the company will offer a free repair program to fix the power board components of 9,434 OLED TVs sold in China between 2016 and 2019. The notice came after LG's announcement in July that it would offer free repairs for about 60,000 OLED TVs sold in Korea between 2016 and 2019 to replace the power board components.

LG said it has launched the repair program as the company detected some of the components had shown a performance drop, which could cause increases in current and potentially lead to overheating.

Following the recall announcements in Korea and China, LG may have to expand its repair programs in other countries especially in Europe, one of the company's important markets for high-priced OLED TVs.

The European Commission, which represents the interests of the EU, announced recently that LG's OLED TVs may have potential health and safety defects.

"During the operation it is possible that the TV overheats which might cause certain damages to the power board or back cover preventing the normal operation of the TV. Potential burn/scald of finger in case of unintentional contact with hot surface of TV back cover; Potential smoke inhalation from defected TV," the European Commission wrote on its website.

Given the European market accounts for a large portion of LG's OLED TV sales, industry officials said LG would struggle if it is required to expand the recall to other nations.

LG Display's Guangzhou factory / Courtesy of LG Display

Despite the technology issues, industry analysts forecast LG Electronics will be able to see growing popularity with its premium TVs. Due to the COVID-19 pandemic, TV manufacturers had been expected to be hit hard as the global economy faces a deep recession.

However, with more people staying home longer than before due to rising trends in remote working and education, TV makers are seeing soaring demand for TVs especially high-priced ones.

TV makers lost their chances to boost TV sales after mega sporting events such as the Tokyo Summer Olympics and the European Championship 2020 were postponed until next year due to the pandemic, but they think the sales of their premium TVs will rise in the second half of this year.

The manufacturers expect they can recoup the losses as Sony and Microsoft are set to release their new gaming consoles in November and major sales events such as Black Friday and Cyber Monday are coming up.

According to data by research firm Omdia, the sales volume of OLED TVs in the second quarter of this year was bigger than expected thanks to increased sales of large televisions.

Omdia's recent data showed OLED TVs reached 568,300 sales in the global market, around 5 percent more than the research firm's estimated figure of 543,000. The research company also raised its estimation of OLED TV sales in the second half of this year. In June, Omdia forecasted around 714,000 and 1.16 million OLED TVs will be sold in the third and fourth quarters, respectively, but it recalculated its estimation ― 904,000 in the third quarter and 1.2 million in the fourth quarter.

Industry analysts said LG Electronics, which has been focusing on improving sales of OLED TVs, and its affiliate LG Display, which exclusively supplies OLED panels to TV makers, will become the main beneficiaries of the market trend.

In July, LG Display's OLED manufacturing plant in Guangzhou, China, finally began mass-producing panels using its 8.5th-generation glass-cutting technology.

"It is thought that LG Electronics is seeing a favorable performance in the sales of large, high-priced TVs. This is because there has been growing demand for the products due to the continuing work-from-home trend and regional lockdown measures after the COVID-19 outbreak," said Lee Wang-jin, an analyst at eBest Investment Securities.

"The sales of its OLED TVs in July and August were 130,000 and 160,000, increases of 55 percent and 56 percent respectively from the same period in 2019. The sales of OLED TVs with a 75-inch or larger display showed an especially sharp increase, rising by 357 percent and 146 percent, respectively."

Given TV sales usually peak in the fourth quarter and the company already sold 690,000 OLED TVs in the first half of 2020, the analysts added LG Electronics will likely see a surge in its yearly revenue.

Kim So-won, an analyst at Kiwoom Securities, also estimated that LG Display is "forecasted to record 7.1 trillion won in sales, a 34 percent increase quarter-on-quarter, and an operating profit of 42.1 billion won, which exceeds our previous expectations."