COVID-19 Irony... Display Industry Sees Rare Bright Spot

LCD TV Panel Prices Rise Most in 3 Years, Increasing LG Display's Chances of Returning to Profitability

[Asia Economy Reporter Changhwan Lee] The price of liquid crystal display (LCD) TV panels has risen to its highest level in three years, bringing a rare boost to the display industry.

This surge is due to major LCD manufacturers in China experiencing production disruptions caused by the novel coronavirus disease (COVID-19). Improvements in the performance of Korean display companies such as LG Display and Samsung Display are expected.

According to market intelligence firms IHS Markit and WitsView on the 20th, the price of LCD TV panels in February is expected to increase by an average of 11% compared to the previous month. The price has risen for two consecutive months, and the 11% increase is the largest in three years and three months since the 5.1% rise recorded in November 2016.

Prices for LCD TV panels are rising across all sizes, from 32 inches to 75 inches, covering both small-to-medium and large panels. IHS Markit forecasts that LCD TV panel prices could rise by up to 15% in March as well.

The reason for the price increase is that major LCD TV panel manufacturers in China are unable to maintain normal production due to COVID-19. Wuhan City in Hubei Province, China?the epicenter of the virus?is home to the world's largest LCD TV panel manufacturer BOE, as well as other major Chinese LCD companies such as CSOT (China Star) and Tianma. The outbreak has caused these companies to struggle to operate their factories properly.

IHS Markit analyzed that production at all LCD factories in China will drop by at least 10% and up to 20% in February compared to the previous month. With production significantly reduced, the supply volume to TV set manufacturers is also expected to decline by more than 10%.

Last year, an oversupply of LCD TV panels caused prices to plummet, prompting major companies to cut production. LG Display announced last month that it plans to cease domestic production of LCD TV panels within this year and focus on production in China.

This is a strategic response to the deteriorating profitability caused by the decline in LCD TV panel prices. Samsung Display also announced last year that it will invest 13.1 trillion won to gradually convert the LCD line at its Asan plant in Chungnam into a Quantum Dot (QD) display line.

In this situation where LCD TV panel supply is restricted and COVID-19 is spreading, panel prices are soaring significantly. This trend is expected to continue throughout the year. The virus remains uncontrolled, and large-scale sporting events scheduled for this year are expected to increase demand.

Starting in June, the UEFA Euro 2020 football tournament will be held in Europe, followed by the Tokyo Olympics in Japan beginning in July. In years with major sporting events, TV sales generally tend to increase.

Dongwon Kim, a researcher at KB Securities, said, "With major sporting events such as Euro 2020 and the Tokyo Olympics approaching this summer, global TV manufacturers are likely to stockpile LCD TV panel inventory for new model marketing," adding, "Due to supply-demand imbalances, LCD TV panel prices may continue to rise."

The rise in LCD TV panel prices is also good news for Korean display companies. LG Display, whose LCD business accounts for 70-80% of total sales, is expected to benefit the most. LG Display recorded a loss of about 1.3 trillion won last year due to a sharp decline in LCD TV panel prices. Samsung Display's LCD division also posted losses last year.

However, the outlook for this year is much more positive. With rising panel prices and limited supply, display companies are expected to secure profitability. An increase in sales of high-margin organic light-emitting diode (OLED) panels is also anticipated, raising expectations that LG Display’s performance could return to profitability this year.

A representative from the display industry said, "Since it is still early in the year, it is not easy to predict the annual performance of LG Display or Samsung Display," but added, "With LCD panel prices rising sharply and major events upcoming, the atmosphere is not bad."

This content was produced with the assistance of AI translation services.