'Pent-up' Declines and Raw Material Prices Rise... Samsung-LG Face Increased TV Business Burden in Second Half

Panel Purchases in the First Half Increase by 66% and 38% Year-on-Year
Betting on Mega and Premium Sales

LG Electronics is showcasing OLED TVs at overseas home appliance stores.
[Photo by LG Electronics]

[Asia Economy Reporter Kim Heung-soon] The prices of liquid crystal display (LCD) panels, the raw materials for the TV businesses of Samsung Electronics and LG Electronics, have risen significantly compared to last year, increasing concerns about profits in the second half, which is considered the peak season for the home appliance industry. This is because the burden of raw material costs is growing in a situation where it is difficult to expect the same level of 'pent-up' effect?where suppressed consumer sentiment due to COVID-19 explodes?as in the same period last year. These companies plan to defend their performance by promoting extra-large and premium products, which have higher profitability relative to costs.

According to the industry on the 20th, as of the first half of this year, the price of display panels for TVs and monitors, which are major raw materials for Samsung Electronics' consumer electronics (CE) division, increased by about 66% compared to the same period last year. Samsung Electronics spent 4.5277 trillion won, accounting for 31.4% of the CE division's raw material costs in the first half, on purchasing display panels, most of which is understood to be expenditure for LCD panels.

LG Electronics also announced that the average price of LCD TV panels purchased in the first half rose by 38.1% compared to the same period last year. This is due to shortages of panel raw materials such as glass substrates and semiconductors, as well as Chinese companies, which occupy 60-70% of the LCD market, raising prices. Consequently, the prices of finished products also rose accordingly. However, sales volume increased, helping to defend profits. According to market research firm Omdia, Samsung Electronics' global TV shipments in the first quarter reached 11.615 million units, an 11.1% increase compared to the previous year. During the same period, LG Electronics shipped 7.2799 million units, a 15.1% increase year-on-year.

The key issue is whether this upward trend will continue into the second half. An industry insider said, "TV sales driven by the COVID-19 special demand have continued to some extent, and as vaccination progresses in earnest, the situation of staying only indoors is likely to gradually ease," adding, "A certain level of decline from the sharply increased sales volume in the second half of last year is inevitable."

In fact, global LCD TV shipments in the third quarter of this year are expected to decrease by 13% compared to the same period last year, reaching 53.964 million units. Shipments in the fourth quarter, when large-scale discounts occur, are also forecasted to decline by about 3% year-on-year to 66.487 million units.

LCD panel prices, which had nearly doubled for over a year since May last year, began to decline after peaking in July, but the drop is not significant, so prices are expected to remain higher than usual. According to market research firm WitsView, as of the first half of this month (1st to 15th), the price of a 65-inch LCD TV panel was $297, down 0.3% compared to the second half of last month (16th to 31st). During the same period, the price of a 55-inch LCD TV panel also fell 0.7% to $233.

Samsung Electronics plans to focus on selling extra-large and premium product lines, where demand is increasing. This is because these products are less pressured by raw material price increases compared to small and medium-sized products and are also effective in strengthening market dominance.

LG Electronics has set a plan to break away from the 'LCD TV concentration' through organic light-emitting diode (OLED) TVs, which have grown to account for more than 30% of total sales. They have strengthened their extra-large product lineup by adding an 83-inch model to the existing 48-, 55-, 65-, 77-, and 88-inch models. An LG Electronics official said, "Even if the overall TV market is hit, demand for premium TVs is expected to remain solid," adding, "We plan to focus on practical growth."

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