Apple supplier LG Display slashes investment plans as losses mount
SEOUL (Reuters) - South Korea’s LG Display Co Ltd , a key Apple supplier, slashed its investment plans by $2.7 billion to 2020 citing concern for the global smartphone market, as it posted a second consecutive quarterly loss on sagging panel prices.
The cut underscores the bleak outlook for electronics makers and comes a week after another Apple Inc supplier, Taiwan Semiconductor Manufacturing Co Ltd (TSMC) , also scaled back its revenue and investment estimates.
“It is a conservative approach resulting from uncertainty around the mobile market,” Don Kim, LG’s chief finance officer, told an earnings conference call, referring to the capex reduction.
LG shares tumbled 7 percent versus the broader market's 0.3 percent fall after it flagged faster-than-expected panel price declines and an uncertain outlook.
“Market conditions are turning favorable, but still the unpredictability is high,” Kim added. “Oversupply and asymmetrical competition are unavoidable.”
LG said it would trim investment by 3 trillion won ($2.7 billion) from what was planned by 2020, without revealing its total or previous capex targets. It also warned that it could adjust production in South Korea and China in response to trade disputes between Washington and Beijing.
The investment cut would not impact plans to “speed up the shift” from LG’s mainstay liquid crystal display (LCD) business toward next-generation organic light-emitting diode (OLED) panels, the company said.
Plans to invest about 20 trillion won in OLED panels by 2020 remained unchanged, meaning the cuts would apply mainly to LCD operations.
The OLED panel business has yet to make a profit for LG but the company said it would be positive for earnings in the third quarter. LG is focused on investing in OLED technology, with strong positions in large OLED TV screens.
The shift comes as its traditional LCD business, which analysts estimate makes up more than 90 percent of LG’s sales, is struggling with falling prices as fast-growing Chinese panel makers ramp up their capacity.
Prices of 50-inch LCD panels slid 38 percent in May versus the same month last year, according to South Korean government data.
“LCD industry is already in a down-cycle, which will be difficult for LG to get away from, so LG will concentrate more on OLED to differentiate,” said John Ko, analyst at NH Investment & Securities.