Apple suppler LG Display expects improved profit outlook on increased OLED demand

On Friday, LG Display Co Ltd, an Apple Inc supplier offered an optimistic outlook for the year on the back of higher demand for its organic light-emitting diode (OLED) panels sending its shares higher by 4%.

The optmistic forecast comes in the wake of the South Korean company seeing prolonged decline in liquid crystal display (LCD) panel prices, higher costs following strategy changes, restructuring and a management shake-up.

LG Display said, it will stop the domestic production of LCD TV panels by the end of 2020 and will instead focus its resources in OLED displays.

“In the second half of the year, revenue from our large OLED panels will rise steeply in line with the increase in production from (the firm’s) Chinese OLED fab,” said LG Display’s Chief Financial Officer Suh Dong-hee on an earnings call.

In a statement, LG Display said, it expects to commence mass production of OLED displays at its factory in China sometime in the March quarter.

Despite the outbreak of China’s coronavirus, LG Display, which has not closed any of factories in China, said the outbreak increases uncertainty in the supply side of the LCD market.

LG Display has posted a quarterly loss of $361.6 million (422 billion won) in the October-December quarter, compared with an operating profit of 279 billion won a year earlier. This is against an analysts’ expectation of 578 billion won loss, according to Refinitiv SmartEstimate.

LCD panel prices have been on a downward slope since two-and-a-half years in a market that has been croweded with Chinese suppliers. The glut has forced LCD display makers, including Samsung Display and LG Display to make production cuts – a move analysts described as one which is likely to take some pressure off prices during 2020.

Although prices of LCD displays have risen slight since December, on Thursday, Samsung Electronics stated, it expects market demand to remain weak throughout 2020.

“South Korean display makers including LG Display could benefit from a recent uptick in LCD prices, but LG Display will likely speed up its transition to OLED business as the global LCD market has long been suffering from a supply glut,” said Kim Chul-joong, an analyst at Mirae Asset Daewoo Research.

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