LG Display to ‘Speed Up’ Cessation of Korean LCD TV Panel Fabs: CFO

LGD shipped 7.8 million square meters (83.96 million square feet) of display panels in the quarter, down 12.4% year over year and 3.7% lower sequentially from Q1, it said. LGD’s Q2 results “underperformed” its “initial guidance,” due mainly to “shipment disruptions” from the COVID-19 lockdowns in China, said Brian Heo, head-investor relations, on an earnings call Wednesday.

“Soft demand in the downstream” and continually falling LCD panel prices also were to blame for the Q2 revenue and earnings shortfalls, said Heo. “Recovery in Q3 is likely to be limited, due to the demand slowdown caused by macro instability and weaker consumer confidence,” plus customers’ “attempts to minimize inventory,” he said.

As the “economic downturn looms, consumption is expected to generally to slow down, except for essential goods,” said Chief Financial Officer Sung-Hyun Kim. “Set makers and retailers in general are becoming more conservative in their business operations,” he said. “Assuming that the trend will continue for some time, the company will strengthen risk management, while actively seeking to identify new growth drivers for the future.”

LGD will remain “unwavering” in its “business-realignment initiatives, more so now to reduce volatility and ensure stability in operations,” said Kim. One example is LCD TV panels, “where differentiation is deemed to be limited,” he said. LGD’s LCD TV panel business “is currently being downsized in phases, with the goal of discontinuing domestic production” in South Korea “sometime next year,” he said. “We will now speed up this process, given the worsening market and competitiveness.”

LGD will seek to boost its “operational efficiency to respond to the highly volatile environment,” said Kim. “We are revisiting the optimal capacity for each fab, and finalizing how to enhance cost efficiencies,” including by reducing “fixed costs,” he said. “We will also ratchet up activities for cost innovation and efficiency, as the insecure supply chain and inflationary pressures have driven up volatility in production costs.”

The panel-maker intends “to focus more on minimizing inventory, given the uncertainty in the market outlook,” said Kim. LGD in 2022's second half will put a special focus on “recovering the shipment disruptions” caused by the COVID-19 lockdowns in China, he said. It will also key on “proactively and flexibly adjusting production to minimize inventory by the end of the year,” he said.

LGD's Q2 capacity slipped to 10.9 million square meters (117.3 million square feet), down 6% year over year and 5.3% lower sequentially from Q1. Corning CEO Wendell Weeks said Tuesday that fab utilization rates of the glassmaker's major panel customers plunged in June to their lowest levels since 2009's Q1 “at the height of the financial crisis" (see 2207260037).

LGD will seek to strengthen its “dominance” in the large OLED TV and information tech segments, “where the company already has differentiated competitiveness,” said the CFO. OLED TV “is showing meaningful performance, growing in actual sales, even when the overall TV market is showing negative growth,” he said. “We will continue solidifying our market dominance in large OLED, based on our fundamental competitiveness, as large OLED increasingly becomes the mainstream.”

The panel-maker also will work to “actively develop a make-to-order business to establish more consistent business operations,” said Kim. “As business volatility keeps rising,” LGD is “accelerating our push” to increase make-to-order sales as a portion of the overall business, and will do so “based on alliances with key customers,” he said.