Samsung set to order LG panels

A new television by Samsung Electronics, expected to hit local shelves as early as the beginning of 2018, will be unlike any other made by the electronics giant.

The new model will be sold with Samsung’s logo but its liquid-crystal display (LCD) panel will come from LG Display, a display producer and affiliate of LG Electronics, Samsung’s biggest rival.

“The negotiation between Samsung Electronics and LG Display regarding the use of LCD panels, which has dragged on for a year since it started last December, is in the final stage,” said an industry source. “As early as the beginning of next year, the LCD panel produced by LG Display will be mounted in Samsung Electronics’ televisions.”

The source added that the quantity of supplied panels will not exceed 100,000.

Although the volume of supply itself is relatively small, industry insiders still view the deal as a milestone as two rival companies are collaborating on a key component. If the companies finalize the deal, it will be the first time that Samsung has received supplies from a rival company that it has been in fierce competition with globally for years.

As late as in 2013, Samsung Display, Samsung’s panel-producing arm, was in a legal dispute with LG Display over cases such as LCD patent infringement.

Earlier this year, Samsung said that the organic light-emitting diode (OLED) televisions made by LG Electronics have various defects including burn-in if used for a long period.

Despite their rivalry, the decision by Samsung to use an LG-made panel was driven by the sudden suspension of panel supply by Sharp Corporation, a Japanese electronics producer.

Sharp Corporation was taken over by Taiwanese electronics company Hon Hai Precision Industry last year, better known as Foxconn.

After Hon Hai took over the Japanese company, it decided to stop the supply of television panels to Samsung starting this year. The Korean electronics giant was left high and dry without a supplier for the panels, a key component in Samsung televisions. Although the company has its own display unit, Samsung Display mainly supplies smaller OLED screens that are used for smartphones and does not have the capacity to produce LCD panels stably enough to fulfill the demand.

Samsung scrambled to find a supplier before eventually settling on LG Display.

“Samsung Electronics needs a stable LCD supplier as it uses LCD panels widely on its mid- and low-priced televisions as well as on its premium QLED televisions,” said a display industry insider.

Market insiders initially expected that LG’s display unit would supply about 700,000 panels to Samsung, the quantity that was supposed to be provided by Hon Hai.

However, Samsung is expected to work with new suppliers from elsewhere, including China.

“With panel supplies on the rise in the second half, the company will be able to receive LCD panels from Chinese producers such as BOE,” said a manager from Samsung.

It is also difficult for LG Display to quickly expand its LCD production. Its LCD production plant in Paju is already running at maximum capacity due to continuous demand across the globe.

Still, Samsung’s decision to get displays from LG is a move to extend the partnership even beyond 2018, according to some analysts, as it needs a reliable supplier of LCD panels when prices recover next year.

“After 2012, LCD TV demand globally rose in each even-numbered year [due to successive international sports events],” said Jeong Seok-won, a researcher from Hi Investment & Securities.

“If the demand for televisions shows a clear sign of recovery, then the demand for mid- and large-sized LCD panels will exceed supplies, slowing down a fall in panel prices that started during the second half of this year.”

BY KIM DO-NYUN [choi.hyungjo@joongang.co.kr]