Chinese Companies' Check and OLED Performance Expansion... Samsung Electronics and LGD Both 'Win-Win'

Samsung Electronics Secures Stable Supply Chain... Green Light for Full-Scale Entry into OLED TV Market
LGD Secures Stable Revenue Sources... Increased Expectations for Additional Client Acquisition

Seoul Samsung Electronics Seocho Building view [Image source=Yonhap News]

[Asia Economy Reporters Heungsun Kim, Minwoo Lee] Samsung Electronics has secured a stable supply chain for organic light-emitting diode (OLED) panels by partnering with LG Display, while also enhancing its price negotiation power in future talks with other companies. LG Display, in turn, has secured Samsung Electronics?a major influencer in the global premium TV market?as a client, ensuring a stable revenue source and anticipating further client expansion.

According to financial investment and display industry sources on the 21st, Samsung Electronics is set to sign a contract to receive 2 to 3 million OLED TV panels annually from LG Display. It is considered unusual for Samsung Electronics to source OLED panels from LG Display, a competitor of its subsidiary Samsung Display. Previously, in 2017, when Sharp Corporation of Japan halted panel supplies, Samsung Electronics procured LCD TV panels from LG Display, but this is the first time for OLED panels.

As LCD panel prices, which had been cheaply secured from Chinese companies, soared dramatically, deteriorating profitability, Samsung Electronics is now making its OLED TV market entry more tangible. For years, Samsung Electronics had increased the share of Chinese companies in its LCD supply chain to enhance cost competitiveness. However, with the surge in LCD panel demand due to COVID-19, prices began to rise. According to market research firm Omdia, the average price of a 55-inch standard LCD panel in Q1 this year was $200, a 73.9% increase compared to the same period last year. This contrasts with an 8.1% decline in OLED panel prices during the same period. Since LCD panels and the backlight units (BLU) that emit light behind them account for about 54% of the production cost of LCD TV sets, the profitability of LCD TVs has significantly worsened.

Meanwhile, since the second half of last year, domestic companies such as Samsung Display and LG Display have effectively withdrawn from the LCD TV panel market, allowing Chinese display companies like BOE and CSOT to dominate. With dependence on Chinese companies already reaching 60-70%, it has become difficult for Samsung Electronics to gain an advantage in price negotiations. An industry insider said, "Chinese companies dominate the LCD panel ecosystem, reducing volume and raising prices, causing set manufacturers who source from them to struggle with profitability," adding, "To overcome this, there is a growing trend to consider OLED TVs as an alternative."

As the OLED TV market rapidly expands, Samsung Electronics no longer has a reason to stick with LCD TVs. Omdia forecasts global OLED TV shipments to reach 5.8 million units this year, nearly double the 2.99 million units shipped in 2019. During the same period, LCD TV shipments are expected to decline from 219.9 million to 217.3 million units.

Samsung is developing a large OLED panel called ‘QD Display’ through its subsidiary Samsung Display at the group level, but stable mass production remains challenging. Although mass production is expected within this year, significant time is needed to stabilize yields in the early production phase. Samsung Display, which has already been asked by Samsung Electronics to extend the operation of its 8th-generation LCD line, lacks space to add production facilities for large OLED display panels. Therefore, OLED panel shipments are estimated to be at most around 1 million units, which are likely to be shared between Samsung Electronics and Japan’s Sony. Consequently, it will be difficult to launch OLED TVs solely with in-house supply next year, and achieving economies of scale will be challenging, potentially weakening price competitiveness. Hence, it is expected that Samsung Electronics will rapidly expand its OLED TV market share by sourcing from LG Display, whose yield and production capacity have been proven.

This is also a major boon for LG Display. Securing Samsung Electronics, which wields significant influence in the global premium TV market, as a client is expected to elevate the market size itself. If Samsung Electronics makes a full-scale entry into the OLED TV market, other TV manufacturers are also expected to accelerate their transition to OLED panels. As of early this year, 19 manufacturers worldwide produce OLED TVs across Korea, the United States, Japan, China, and Europe. LG Display is the sole supplier of large OLED panels to these companies. Supplying panels to Samsung Electronics will increase LG Display’s client base and is expected to have a positive effect on strengthening the competitiveness of the domestic market, where only LG Electronics currently produces OLED TVs. The market estimates LG Display’s large OLED panel shipments at 7.9 million units this year, a significant increase from 4.5 million units last year. Shipments are projected to rise to 11.7 million units next year.

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