[Click eStock] LX Semicon, Minimal Impact from LG Display Exit Strategy

[Asia Economy Reporter Hwang Junho] Hi Investment & Securities stated that although LG Display announced at its Q3 earnings conference call this year that it would implement an exit strategy for its LCD TV panel business, which has seen deteriorating profitability, the impact on LX Semicon is expected to be minimal, maintaining the target stock price at 130,000 KRW.

LX Semicon's Q3 sales this year were 478.6 billion KRW, down 5% year-on-year. Operating profit was 60.4 billion KRW, a 53% decrease compared to the previous year. Both sales and operating profit fell short of market expectations. This reflects a decline in IT device demand due to global economic slowdown and the prolonged Russia-Ukraine conflict. The utilization rates of major panel manufacturers in Q3 this year dropped to historically low levels of 60-65%.

In particular, LG Display, LX Semicon's key client, announced at its Q3 earnings conference call that it plans to implement an exit strategy for its LCD TV panel business, which has seen significantly worsened profitability due to weak front-end demand and competition with Chinese companies. LG Display plans to first suspend operations at its domestic 7th generation line (130K/month) and part of its Guangzhou, China 8.5th generation line (total 170K/month, of which 80K/month). Subsequently, the remaining LCD TV panel production lines will be gradually reduced, with a complete withdrawal from the LCD TV panel business expected from 2024.

Jeong Wonseok, a researcher at Hi Investment & Securities, said, "This may raise concerns about a decrease in LX Semicon's shipments of medium-to-large LCD DDI."

However, he explained, "It is estimated that the sales proportion to LG Display's LCD TV panels is only about 5-6%. Domestic TV set manufacturers (Samsung Electronics, LG Electronics) require the adoption of LX Semicon's DDI when sourcing LCD panels from Chinese companies, so market share within Chinese clients such as BOE and CSOT could further increase."

Accordingly, he added, "The decision to suspend LG Display's LCD TV line operations is expected to have a very minimal impact on the company's performance," and "Considering that it is unlikely for front-end IT demand to recover by the first half of next year, we are revising down next year's performance forecast (sales of 2.6 trillion KRW, operating profit of 295.7 billion KRW)."

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