LG Display Plans Spending Cuts As Losses Mount

Mike Wheatley

LG Display says it will cut spending by around 500 billion won (around £330 million) and revamp some of its older liquid crystal display TV production lines after suffering massive losses in its fiscal third quarter results.


For the third quarter, LG Display posted a loss of 437 billion won (£288.7 million), well below the 322 billion won loss forecast by analysts. A year earlier, the company had recorded a 140 billion won profit.

Revenue was also down 5% compared to a year ago, officials said.

The company’s bottom line has been hit by falling prices of LCD panels over the past year, and recently replaced its long-time CEO Han Sang-beom and began a voluntary redundancy program in order to cut costs. The company is now embarking on “structural reforms at zero base”, Chief Financial Officer Suh Dong-hee said in a statement.

Those reforms include cutting spending from a planned 8 trillion won to 7.5 trillion won, Suh said.

The company will also downsize two of its main LCD TV panel production lines in South Korea, and is looking at various options going forward, the CFO added. Those reforms should be completed by early next year.

LG Display’s problems stem from a global supply glut in the all-important LCD display market, which has led to prices falling considerably over the past year, Pulse News reported. The supply glut has been caused by Chinese display makers, who have been aggressively producing panels to ramp up their market share, backed by subsidies from the Chinese government.

Prices for LG Display's main product, 50-inch LCD panels for television sets, were down around 16% in the third quarter compared to one year ago, according to data from WitsView.

TV panels accounted for 32% of LG Display’s total revenue in the third quarter, down 9% from the previous three-month period. Mobile display panels accounted for 28% of its revenue.

The planned scaling down of the two LCD production lines is part of a wider initiative by the company to shift to the more lucrative OLED display panel market. Not only is the technology more profitable, but LG Display also has a big advantage as it’s currently the world’s only significant manufacturer of OLED TV panels.

At the same time, LG Display also wants to become more competitive in the LCD business, saying it still sees strong growth potential in the IT, commercial and automotive segments of the market.

Analysts expect the restructuring to benefit LG Display in the long run, but warned that it will likely suffer losses again in the next quarter. A recovery isn’t expected until next year at the earliest.