LG Display turns to red in Q2 on sluggish demand, falling panel prices

A large OLED display is seen at Times Square in New York City, in this photo provided by LG Display Co. on April 23, 2022. [YONHAP]

LG Display said Wednesday it turned to red in the second quarter on production disruptions caused by China's Covid-19 lockdowns and sluggish demand for display panels used in electronics products.

The panel maker reported its second-quarter net loss of 382 billion won ($290.8 million), turning from a profit of 424.1 billion won a year earlier, in a regulatory filing.

It also posted an operating loss of 488.3 billion won for the April-June period, compared with a profit of 701.5 billion won a year ago. Sales fell 14.6 percent to 5.6 trillion won.

The operating loss was 38.8 percent higher than the average estimate, according to the survey by Yonhap Infomax, the financial data firm of Yonhap News Agency.

The company said the poor performance in the second quarter is blamed on difficulties in securing parts and delivering set products, especially amid the prolonged lockdowns in China, coupled with weak demand for IT products.

Demand for LCD panels has been waning, as most countries have lifted pandemic restrictions, and people spend less at home and on personal IT devices. Enterprise demand has also been slow, the company said, due to the hostile macro environment.

LG Display said it would continue to scale down its loss-making LCD TV business "where differentiation is deemed to be limited," with a goal of discontinuing domestic production of LCD TV panels sometime next year.

"We are planning for an earlier exit. We will begin to discontinue production and be reducing our capacity into the first half of next year," the company said during a conference call, noting that the global TV market shrank by 24 percent last year and 10 percent in the first half of this year.

In the second quarter, TV panels accounted for 31 percent of the revenues, while panels for IT devices, including monitors, laptops and tablets, took up 45 percent, and those for mobile devices and the others accounted for 24 percent, it said.

Instead, the company will focus more on premium organic light-emitting diode (OLED) panels to turn the business around, adding that shipments of OLED panels for high-end TVs and smartphones are expected to grow in response to the seasonal demand in the second half.

It will also put more resources into the auto display sector, where it is leading the global market by sales, with the goal of exceeding a 30 percent market share in the next three years, the company said.

It warned, however, of headwinds in the coming months, as an economic downturn looms and demand will continue to diminish amid macroeconomic uncertainties and weaker consumer confidence, as well as clients' attempts to minimize inventory.

LG Display said it will strengthen risk management while actively seeking to identify new growth drivers for the future, as set makers and retailers in general are becoming more conservative in their business operations.

"We'll keep monitoring the market situation and run our operations and inventory based on the assumption that the downside risks are going to materialize," it said.

LG Display shares added 0.33 percent to close at 15,050 won on Wednesday, slightly higher than the wider market's 0.11 percent gain.

Yonhap