LCD TV, the higher the panel price, the more you lose… Samsung and LG cannot be sold in the pursuit of China

Input 2021.02.21 06:00

Up to 50% increase in LCD panel prices since last year
LCD TV margin shifted to negative… Loss on sale
TV share, Samsung·LG Electronics 35.2%… 33.8% of Chinese companies

Since the second half of last year, as the price of LCD panels for TVs has risen, a’red light’ has entered the profits of TV manufacturers such as Samsung Electronics and LG Electronics. Panel prices, which account for more than half of the LCD TV manufacturing cost, are expensive, and the more they sell, the more they lose.

However, manufacturers such as Samsung and LG, who cannot but sell LCD TVs to win the TV market share, are deeply concerned. Samsung Display and LG Display, which were trying to withdraw from the TV LCD panel business due to low profitability, decided to extend LCD panel production at the request of their customers, Samsung Electronics and LG Electronics, respectively, but this also raises concerns over profit deterioration.

According to market research firm Omdia on the 21st, panel prices are rising to the ceiling as TV demand increased last year due to the novel coronavirus infection (Corona 19). In addition, Japan’s NEG, which produces glass substrates for LCD panels, caused a price increase as the supply and demand for glass substrates was not smooth due to a power outage last year. The price difference between the first half of last year and the second half of last year is estimated to be up to 50% or more.

The 55-inch panel price for TVs compiled by Omdia rose from $121 (about 130,000 won) in July last year to $194 (about 210,000 won) this month. During the same period, the 65-inch panel price ranged from $179 (about 190,000 won) to $244 (about 260,000 won). Most of the 43-32-inch TVs sold in the mid-to-low-end market have LCD panel prices ranging from $78 (about 80,000 won) and $35 (about 38,000 won) to $128 (about 140,000 won) and 68 (7) in July last year. 10,000 won).

Along with the rise in panel prices, the price of 55-inch ultra-high-definition (UHD) LCD TV panels for OEM production (OEM) also rose 25.7% from $272 (about 300,000 won) to $342 (about 378,000 won) in September last year.

Due to this, the profitability of LCD TVs was found to be significantly lowered. Omdia reported that the current 55-inch LCD TV revenue fell from 0% in the second half of last year to about minus 2% this year.

The problem is that panel prices will continue to rise in the future. Hana Financial Investment Research Institute Kim Hyun-soo said, “As global TV demand declines this year, panel prices are expected to slow down from last January. However, due to a disruption in panel supply due to a power outage in Japan’s NEG beforehand, the price increase is getting longer than expected. “In the short term, the panel price is considered to be after the Chinese New Year (February),” he said.

There is also a prospect that Chinese LCD panel makers, which have increased the deficit by setting low panel prices that continued until the beginning of last year, will lead the price increase to make up for profits for the time being. An industry insider said, “Since Chinese companies that have lowered LCD panel prices for a while are trying to increase panel prices to compensate for the deficit, LCD panel prices are likely to increase further in the future.”

Samsung Electronics and LG Electronics, which are the 1st and 2nd largest in the global TV market, are believed to have significantly reduced TV profitability due to rising LCD panel prices. However, in order to gain an edge in the market share competition with Chinese companies, which are pursuing last year’s shipments, it is a position to continue selling LCD TVs. In terms of TV shipments in the third quarter of last year, domestic companies such as Samsung and LG accounted for 35.2%, and Chinese companies such as TCL and Hisense accounted for 33.8%.

Samsung Electronics and LG Electronics, which have increased the proportion of TV LCD panels in China, requested Samsung Display and LG Display to extend LCD panel production at the end of last year to improve profitability deterioration and secure a stable supply chain. The two companies, which tried to stop producing LCD panels for TVs within the first quarter of this year at the latest due to the gains of Chinese companies, could not turn away from the SOS of Samsung Electronics and LG Electronics, the largest customers, and decided to extend production for the time being.

However, the problem is that despite the rising LCD panel price, the two display companies are not sufficiently reflecting the price increase to these companies, which are customers. They are supplying panels relatively cheaper than the market price. According to an analysis, the two display companies that tried to stop panel production due to deteriorating profits were again facing a bond of deteriorating profits.

An industry insider said, “Inside Samsung Display, it is known that Samsung Electronics supplies LCD panel prices to the company at a lower price than the market, and there are considerable complaints about the company’s performance deterioration.” There is a similar point inside LG Display, which was trying to switch to light-emitting diodes (OLED).”