Sluggish LCD TV Sales Fueling Panel Oversupply, LG Display Says
Tight LCD panel inventory earlier this year has given way to a slight oversupply fueled by sluggish U.S. and European TV sales in May and June, LG Display executives said on a quarterly earnings call Thursday. LCD retail TV inventories were “less than a week” above “normalized” levels at the end of Q2, moving panel manufacturers to slow production heading into the fall, LG officials said. Precise inventory levels weren’t available, but 45 days supply is normal, LG Display executives said. LG Display operated its plants at full capacity in Q2 but likely take output down slightly in Q3 based largely on customer demand, the company said. It hasn’t reduced production yet, said Anthony Moon, vice president of investor relations.
Sign up for a free preview to unlock the rest of this article
Export Compliance Daily combines U.S. export control news, foreign border import regulation and policy developments into a single daily information service that reliably informs its trade professional readers about important current issues affecting their operations.
Most extra inventory is thought to be concentrated in CCFL-backlit LCDs, as LED-backlit panels remain in short supply. LED-backlit panels will account for 40-45 percent of LG Display’s shipments in Q3, up from 10 percent in Q1, LG officials said. LG Display’s customers include LG Electronics and Vizio.
LG Display was expected to add 30,000 substrates to its eighth-generation LCD plant by July, but the expansion plans have slowed, analysts said. A second 8G line is expected to start by Q1 2011 with a monthly capacity for 60,000 substrates. LG Display, which also is adding 7.5G capacity, has said it will spend about $4.56 billion this year on capital projects.
LG Display forecasts global sales this year of 190 million LCD TVs and 190 million PC monitors. Notebook PCs are expected to hit 230 million units this year, the company said. The average selling prices (ASPs) of LCD TV and monitor panels have declined since January, Avian Securities analyst Andrew Abrams said. The average price of a 17-inch LCD monitor panel dropped to $69 in June, nearly matching year-ago levels, from $79 in January and $81 in September, he said. In the case of 32- and 42-inch LCD TV panels, ASPs dropped this month to $196 and $318 from $205 and $340 in January, Abrams said.
LG Display’s Q2 shipments increased 5 percent, vs. a forecast for a “low-to-mid teens” rise, the company said. Much of the inventory was concentrated in “semi-finished goods” that were awaiting scarce supply of LEDs, Moon said. Other components, including polarizing film and a light guides, also were tight, Abrams said. “TV suppliers very aggressively tried to increase their business” early this year and built to their forecasts, but “sales were lower than expected,” Moon said.
Inventory levels and prices are expected to stabilize by September. LG Display is projecting shipments to jump in the low-to-mid teens in Q3, Moon said. LG Display shipped 6.44 million square meters in Q2, up from 6.16 million the previous quarter and 5 million year-to-year. The average price per square meter rose to $863 from $739 a year earlier. LG Display’s Q2 net income improved to $460.7 million from $304.7 million, as revenue soared to $5.3 billion from $3.96 billion last year. LCD TV panels accounted for 53 percent of revenue, down from 55 percent a year earlier, and monitors and notebook PCs were 23 percent and 19 percent, up from 22 percent and 18 percent, LG said. Inventory, largely consisting of components as LG Display built up a supply of LEDs, rose to $1.87 billion from $1.42 billion. LG Innotek is among LG Display’s LED suppliers.
LG Display also is ramping up production of OLED panels using 4G substrates. It expects to ship OLEDs for smartphone displays by fall, potentially bringing fresh supply to a market that has been suffering from a shortage. Samsung is the sole OLED manufacturer, but will be joined by AU Optronics in addition to LG Display. LG Display produced a 15-inch panel for an OLED TV, but volume production of large-size displays will require 5.5G substrates that LG Display expects to bring on line within two years, Moon said.