SEOUL (Reuters) - South Korea’s LG Display Co Ltd warned that fourth-quarter profit will not match the third due to falling TV panel prices and it will counter that downtrend by pushing out bigger-ticket products such as ultra high-definition panels.
LG Display and rivals such as Samsung Electronics Co Ltd’s Samsung Display are bearing the brunt of a fall in television set sales, while new technology that could spark a demand cycle has been constrained by production challenges.
“Given weak profitability that TV manufacturers are having right now, it’ll be difficult to expect panel prices to rebound any time soon, but their rate of decline is likely to slow down,” LG Display chief financial officer James Jeong told analysts on Thursday.
“It’s inevitable that our operating profit will decline in the fourth quarter.”
TV displays generated 44 percent of revenue in July-September compared with 47 percent in the same period a year earlier, LG Display said in a statement on Thursday. Mobile telephone and tablet computer displays yielded 25 percent from 24 percent.
The rise in sales of displays for mobile devices such as Apple Inc’s iPhone helped supplier LG Display post its highest quarterly operating profit this year of 389 billion won ($365.06 million), 31 percent more than last year. The mean estimate of 16 analysts polled by Thomson Reuters was 384 billion won.
TV display shipments fell industry-wide in the third quarter from the traditionally weak second quarter for the first time, according to researcher IHS iSuppli. Analysts say this raises concern because TV displays draw the most revenue and because growth in the smartphone market is slowing.
The decline is widely attributed to weak demand for TV sets in China, as well as in developed markets where many households have replaced cathode ray tube TVs with flat-screen models.
TV set manufacturers such as Samsung Electronics and LG Display parent LG Electronics Inc are trying to stimulate demand with sets sporting organic light emitting diode displays.
OLEDs offer crisper resolution and higher contrast than LCDs, and can also be curved. However production challenges - such as evenly spreading organic materials on glass panels - are keeping costs high. A 55-inch OLED TV retails at almost $9,000; an LCD TV of comparable size retails at around $800.
Shares of LG Display have fallen 21.74 percent year-to-date and are in the bottom five losers of 72 top electronic instruments companies in the Asia-Pacific, according to Thomson Reuters StarMine.
They closed up 0.2 percent prior to the earnings announcement compared with a rise of 0.3 percent in the benchmark Kospi index.
Reporting by Miyoung Kim; Additional reporting by Patturaja Murugaboopathy; Editing by Christopher Cushing