Reduced production is the only answer to falling demand and prices... Display industry operating rates 'plummet'

[Asia Economy Reporter Park Sun-mi] As the global economic downturn leads to a general decline in demand for IT devices, the display industry is consecutively implementing production cuts. Although the immediate focus is on LCD panels, the OLED sector, where Korean companies have strengths, is not immune, and there is a possibility that the scope of production cuts may expand.

According to market research firm TrendForce on the 19th, the operating rate of panel factories in the display industry for the third quarter (based on glass substrate input) dropped to 70%, down 7.3 percentage points from the previous quarter. Despite the peak season in the second half of the year, the global display industry has started production cuts due to reduced demand for overall IT and electronic products such as TVs and mobile devices.

Samsung Display has completely withdrawn from the LCD business and fully suspended factory operations starting this month due to the worsening market conditions. LG Display has been lowering its operating rate since last month by reducing the amount of glass substrate input into its domestic LCD panel production lines.

The industry estimates that LG Display’s LCD panel production will be cut by about 10-20% in the second half of the year. The three major Chinese companies, including BOE, which had established market dominance in LCD panel production through price competitiveness, also implemented production cuts ranging from 4 to 13.3 percentage points in the third quarter.

TrendForce analyzed, "To avoid the risk of high inventory levels early next year, panel manufacturers need to maintain the production cut trend through the fourth quarter of this year to reduce inventory. If market conditions continue to worsen, mergers and acquisitions (M&A) will intensify, likely causing significant changes in the industry landscape."

The Korean display industry is responding swiftly. By withdrawing from the LCD market or reducing the LCD share and increasing the OLED share, it is expected that Korea will not suffer as much damage as China. However, even in the second half of the year, which is considered a peak season for IT and home appliances, sales of large TVs and mobile devices are sluggish, making it difficult to be optimistic about the OLED market. Samsung Display has yet to decide how to utilize its existing LCD factories, excluding production facilities.

An industry insider said, "The Korean display industry will also be affected by the overall slowdown in panel business due to decreased set demand and continued weak panel supply and demand," adding, "The OLED market, where Korean companies are focusing their capabilities, is expected to see growth rates below 10% this year and next year." Another industry insider said, "Although production cuts are currently occurring in the LCD sector, plans are being made in preparation for a potential contraction in the OLED market as well."

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