Market Share Gains At Play

LG, AU Each Predict 10 Percent Rise In Their Q2 LCD Panel Shipments

April 26, 2010 by Mark Seavy|Top News

LG Display and AU Optronics forecasts for a 10 percent increase in their Q2 LCD panel unit shipments likely will come from market share gains, not market growth, executives with both companies told analysts. With demand growth expected to be flat, any moves to increase share could trigger price cuts, analysts said.

Any increase in unit volume will come from computer monitor and TV panels and the battle for market share likely will be waged in China, which was saddled with inventory at the end of Q1, LG Display and AU executives said. That inventory is expected to clear in May during annual Labor Day sales there, they said. AU is targeting shipments of 2.2-2.5 million units in China during that period, CEO Lai-Juh Chen said.

The 10 percent unit increase will come from a 3-5 percent rise in manufacturing capacity and a 5 percent jump in the “loading” of production at the factories, Chen said. AU factories operated at 91 percent of capacity in Q1, up substantially from a year ago, the company said. LG Display and AU market share gains could come at the expense of Chi Mei Innolux, analysts said. “The gains in unit volume have to come from somewhere and if it’s a market share game, that doesn’t bode well for pricing,” said Avian Securities analyst Andrew Abrams.

LG Display and AU are both moving to expand manufacturing. AU is expected to increase monthly substrate capacity by late Q2 to 120,000 units from 100,000 units at its 7.5-generation plant. LG Display is adding 30,000 substrates to its current 8G factory by late May to increase monthly capacity to 120,000 units from 90,000, the company said. It will open a new 8G line in Q1 2011 with capacity for 60,000 substrates, it said. The start date for the new 8G line was moved up from second half 2011, analysts said.

As both companies move to boost manufacturing, analysts expressed concern that the expansion could be hampered by components shortages. LEDs, polarizers and other components are in tight supply, AU and LG Display executives said. Though LEDs have been “a little tight,” LG affiliate LG Innotek has improved its supply “quite a bit” recently, said Anthony Moon, LG Innotek’s vice president of investor relations. But while LG earlier this year expected the tight supply of LEDs to ease by Q3, “we're not so sure” now, Moon said. LED-based panels carry a 30 percent premium over CCFL models and are expected to represent 35 percent of LG’s product mix in the second half, up from 10 percent in Q1, Moon said. LED-based panels will account for 15 percent of AU’s Q2 TV shipments, up from single digits in the previous quarter, Chen said. LEDs will be in 100 percent of TV panels by 2013, Chen said. Total global LCD TV sales are expected to hit 185 million units this year, up from earlier forecasts of 171 million units, analysts said. DisplaySearch has projected sales of 180 million units, including 39.2 million in China.

Both companies also are looking to other display technologies for growth. LG Display is investing $225 million to triple capacity for OLEDs. LG Electronics is selling a 15-inch OLED TV in South Korea and is expected to ship it in the U.S. later this year. LG Display expects to have a new 3.5G OLED production line by Q3 (CED March 17 p3) and will triple its capacity by second half 2011, the company said. AU is working with potential customers on designs for displays using subsidiary Sipix’s Microcup technology for e-readers. But AU “still doesn’t have a clear picture of volume yet” for Microcup, it said. Last fall, AU projected shipping 1-2 million e-reader panels this year and was targeting a 33 percent marketshare (CED Oct 26 p4). AU invested $30 million in Sipix last year. AU also is said to be preparing to resume OLED production this year. It halted an earlier OLED development program in 2006 (CED Nov 9/06 p3).

LG Display swung to a $586 million Q1 profit from an $11 billion loss a year ago. LG Display’s average price per square meter rose to $838 from $669. LG Display shipped 6.16 million square meters in Q1, up 64 percent from a year earlier, company officials said. AU posted a $225 million Q1 profit against a $644.3 million loss a year earlier as revenue rose to $3.3 billion from $1.59 billion. AU’s gross profit improved to $364 million from a negative $588 million a year earlier.

LG Display expects the Chinese government to decide by May on its application to build an LCD plant in China, the company said. LG Display has said it’s planning to form a venture with Skyworth Digital Holdings and Guangzhou Kaide Technologies Development for construction of a $4 billion plant in Guangzhou, China. AU has received clearance from the Chinese government for its plans to build an LCD factory and is awaiting approval from Taiwanese officials, the company said.