LG Display seeks rebound by selling Guangzhou LCD plant
LG Display's LCD plant in Guangzhou / Courtesy of LG Display
LG Display will negotiate with a preferred bidder over the sale of its large LCD plant in Guangzhou, aiming to improve the panel giant's fiscal prudence and accelerate its focus on OLED technology.
The company said it selected China Star Optoelectronics Technology (CSOT), a subsidiary of Chinese home appliance giant TCL, as the preferred bidder for the LCD plant in Guangzhou on Thursday. Exclusive negotiations on the specifics of the deal are set to begin.
The deal is expected to generate between 1 trillion won and 2 trillion won ($737 million to $1.47 billion) for LG Display. Chinese manufacturers highly value the competitiveness of large LCD panels for TVs, which still dominate the display market. In 2020, CSOT acquired Samsung Display's LCD plant in Suzhou.
For LG Display, the sale represents an opportunity to rebalance its position in the large LCD market, which has become overheated due to the cost competitiveness of Chinese rivals.
"Although LCD still accounts for the majority of the display market, the technology itself has become something that any company can easily do," an industry official said.
"Given the heated competition, LG Display seems to be making efforts to concentrate its resources on areas where it can differentiate itself from rivals."
The LCD business has been blamed for LG Display's accumulated losses. In the second quarter, it reported 6.7 trillion won in sales, up 41.6 percent year-on-year. Profitability also improved, with the operating loss decreasing from 787.8 billion won to 93.7 billion won, reflecting the company's efforts to scale down its LCD business and concentrate on higher value-added products.
LG Display has yet to disclose its plan on how to use the funds generated from the sale. The company's Chief Financial Officer Kim Sung-hyun said during an earnings call on July 25 that it is exploring various options for the funds and "will share how the proceeds from the sale will be used once the deal is finalized."
However, industry officials point out that LG Display raised 1.3 trillion won in paid-in capital earlier this year. Given the need for investments in small- and mid-sized OLED panels for IT devices, as well as maintaining fiscal prudence, the funds from the plant sale are likely to be directed toward these areas.
Models promote LG Display's OLED TV panel in this undated handout photo. Courtesy of LG Display
LG Display continues to maintain a technological edge over competitors, but China's BOE is rapidly closing the gap by investing over 11 trillion won in OLED technologies. Meanwhile, Samsung Display is making a substantial investment in 8.6-generation OLED production, committing 4.1 trillion won to develop OLED production lines for IT devices by 2026.
Given this, industry officials said LG Display's investments will likely focus on setting up production lines for small- and mid-size 8.6-generation OLED products, which are more efficient than large OLEDs.
"Due to increased shipments of both large and small- and mid-size OLED panels, LG Display's operating profit is expected to turn bullish in the second half of this year for the first time since that of 2021," KB Securities analyst Kim Dong-won said.
"This recovery will be driven by the surge in small- and mid-size OLED panel shipments, which are anticipated to grow by 58% year-on-year to 68 million units, largely due to an expanded supply share with key North American strategic customers."