LCD TV Panel Price Plunge to Slow in Q4, LG Display Says

The plunge in LCD TV panel prices is expected to slow in Q4 as suppliers sell off excess inventory, but prices aren’t likely to stabilize until at least Q1, LG Display executives said on an earnings call Thursday.

LG Display’s average selling price for panels, including those for TVs, PC monitors and notebook PCs, fell 14 percent in Q3 from the previous quarter, executives said. TV panel prices declined 12 to 13 percent and are expected to fall an additional 7 percent in Q4, analysts said. LG Display didn’t disclose its panel ASP in Q3, but the ASP per square meter of glass declined 10 percent from the previous quarter to $778, said Anthony Moon, vice president of investor relations. LG Display had projected inventory and prices stabilizing by September (CED July 23 p1).

The buildup of inventory amid slowing global sales of LCD-related products continued in Q3, with LG Display having three to four days of excess inventory, the company said. LG Display’s weekly production of large-size panels, 9.7 inches and up, is said to run about 3.2 million units, and excess inventory was at about 6 million units by quarter’s end, analysts said. It wasn’t clear how much of the inventory was TV-related, but TVs accounted for 58 percent of LG Display’s Q3 panel shipments, up from 53 percent the previous quarter. PC monitor and notebook PC panels accounted for 19 percent and 15 percent of Q3 shipments, down from 23 percent and 19 percent the prior quarter, company officials said. The other 8 percent included 9.7 inch panels for Apple’s iPad for which LG Display is a major supplier. LG Display’s Q3 iPad-related revenue rose to $471.7 million from $283.9 million in the previous quarter, said Andrew Abrams, an analyst at Avian Securities.

LG Display thinks shipments will increase 5 percent in Q4, most of them from existing inventory, Moon said. It has gradually cut back production, utilization levels for TVs falling from 99 percent in June to 80 percent in September, Abrams said. Overall factory utilization dropped to 80 percent in September from 96 percent in June, he said. About the only production that was constant in Q3 was along fourth-generation lines that make panels for Apple’s iPad, where utilization was 97 percent in September, Abrams said.

Whether price declines end in Q4 will hinge on holiday retail sales, said Kevin Choi, vice president of TV marketing at LG Display. Ideally, prices will “hit bottom” in Q4 amid holiday promotions and retailers will re-stock shelves in Q1, he said. “If prices continue to fall, you will be see more utilization cuts,” Choi said. “If Q4 retail sales are OK, prices will stabilize.” LG Display isn’t ruling out further trimming factory production, but much will “depend on what end demand is,” Choi said. TV sales are expected to increase in China in November and December, and that could help burn off excess inventory, LG Display executives said.

Industrywide TV shipments will increase 15 to 16 percent in 2011, LG executives said. Those of PC monitor and notebook PC panels will rise 3 percent and tablet-related displays 30 percent, they said. While LG Display delayed final payment on equipment of its second 8G production line to Q1, it is said to be placing an order for new gear for delivery in mid-2011. LG Display’s equipment suppliers includes Applied Materials. LG Display’s second 8G line is expected to ramp up production in mid-Q1, with monthly capacity for 30,000 substrates, half the original forecast, industry executives said.

LED-backlit LCD TV panels accounted for 30 percent of LG Display’s Q3 shipments and will likely hit 60 percent in 2011 as the premium charged for the technology declines, Moon said. LEDs had nearly 100 percent penetration in Q3 in notebook PCs and 30 to 35 percent in monitors, he said. The premium charged for LEDs was about 40 percent in September, Choi said. When the premium drops below 30 percent, they will rapidly displace CCFLs as a backlight, Choi said.

While LG Display is producing OLEDs and has demonstrated a 31-inch prototype, it doesn’t expect the technology to be used for a product for “mass-market” TV until 2013, Choi said. “We're studying various production technologies and what generation fab we should go with” for producing large-size, 10-inch and up OLED panels,” he said. LG Electronics has been selling a 15-inch OLED TV in South Korea priced at $2,500. “OLED has a viability, but it’s a cost issue,” Choi said. LG is producing smartphone OLED displays along a 4G line and has said a 5.5G or larger substrate is needed for TVs.

LG Display’s Q3 net income narrowed to $197.7 million from $525.2 million a year earlier, despite a rise in revenue to $5.91 billion from $5.69 billion. The earnings downturn was partly tied to LG’s taking an $88 million charge to write down inventory because of declining prices, company officials said. LG Display shipped 7.2 million square meters of glass in Q3, up 12 percent from the previous quarter, the company said.