LG unit faces lucrative Q4 but Apple threat remains

Korean panel giant LG Display is likely to see its fourth-quarter operating profit nearly double from three months earlier but faces risks stemming from its key customer Apple in the first quarter, analysts said yesterday.

The display maker is expected to have reaped an operating profit of 438.3 billion won ($411.4 million) in the October-December period, compared with the 253.4 billion won in the previous quarter, according to estimates by local securities firms compiled by Yonhap Infomax, the financial news arm of Yonhap News Agency. LG Display is scheduled to report its fourth-quarter earnings tomorrow.
If the estimate is on track, LG Display will extend its operating profit to a second straight quarter after returning to the black for the first time in two years in Q3.

Analysts attribute the rosy results to robust demand for high value-added products, such as panels for premium TVs and mobile devices.

“TV panel shipments and prices were favorable due to seasonal demand, and the addition of iPad mini and iPhone 5 panels shored up revenue and operating profit,” Daishin Securities analyst Jeff Kang wrote in a recent report.

LG Display is known as the major supplier for the world’s top tablet PC maker Apple, which unveiled new iPad tablets and its first long-term evolution (LTE) smartphone last year.

Kang said such specialty products accounted for roughly 60 percent of the total, compared with the upper 50 percent level in the third quarter.

Growing demand for such specialty products also helped offset unfavorable currency conditions, given the greenback’s 3.8 percent slump against the Korean won in the three-month period, according to KDB Daewoo Securities.

Analysts, however, expressed concern about the company’s first-quarter operating profit, citing lackluster market response for the iPhone 5.

LG Display shares recently tumbled 22.6 percent from a three-month high, reflecting concern about slow shipments and possible order cuts for panels for the latest iPhone.

“The first quarter is going to be tough. Eighty percent of it is due to the iPhone 5, while the remaining 20 percent stems from sluggish TV panel shipments,” KDB Daewoo Securities analyst Jonathan Hwang said by phone. Hanwha Investment & Securities analyst Pak Yu-ak echoed such views, forecasting that LG Display’s iPhone LCD and TV panel shipments will slump 49 percent and 14 percent on-quarter, respectively.

Market watchers projected the situation to improve in the second quarter on the back of strong smartphone and tablet PC demand, but said Apple risks could resonate longer.

“Suppliers are now busy speculating on when Apple will release a low-end iPhone. A squeeze in Apple’s profitability will ramp up pressure on parts makers,” said Hwang.

Apple denies harboring such a plan despite rumors it may tap the low-end market to shore up its market share. Yonhap