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Korean display makers likely to suffer Q1 operating loss due to virus: analysts

All News 10:43 April 21, 2020

SEOUL, April 21 (Yonhap) -- South Korea's two major display makers are expected to suffer an operating loss for the first quarter of the year, analysts here said Tuesday, due to the fallout from the novel coronavirus pandemic.

Samsung Display Co., the display manufacturing affiliate of Samsung Electronics Co., was projected to have posted an operating loss of 464.2 billion won (US$378 million) and racked up 6.3 trillion won in sales in the January-March period, according to the data by 13 local brokerage houses compiled by Yonhap Infomax, the financial news arm of Yonhap News Agency.

LG Display Co., an affiliate of LG Electronics Inc., was estimated to have suffered an operating loss of 388 billion won and logged 5.1 trillion won in sales in the first quarter of the year, according to the poll on 11 brokerage houses.

In this photo provided by Samsung Electronics Co. on March 19, 2020, Samsung Electronics Vice Chairman Lee Jae-yong (R) inspects display products from Samsung Display Co. at the company's Asan plant in South Korea. (PHOTO NOT FOR SALE) (Yonhap)

Analysts said a sharp plunge in global demand for smartphones and TVs caused by the COVID-19 crisis has dented the display makers' first-quarter performance.

"Smartphone OLED panels account for 89 percent of Samsung Display's sales, meaning it is likely to take the hardest hit from the COVID-19 pandemic," said Lee Su-bin, an analyst at Daishin Securities.

Increased fixed costs related with the shutdown of its LCD production could also have hurt its performance, according to analysts.

Dealing with a supply glut in the LCD panel industry, Samsung Display last year suspended some of its LCD production lines. The company recently announced that it will cease LCD display production next year and quickly make its transition to next-generation quantum-dot display.

Analysts said LG Display's poor performance may have come from a production delay at its OLED plant in Guangzhou, China, and continued slump in its plastic OLED business.

"It appears that the company's Guangzhou plant needs some time to normalize production as workforce management didn't go as planned due to the COVID-19 outbreak," said Kwon Sung-ryul, an analyst at DB Financial Investment. "LCD panel prices increased through March, but it was not enough to offset a plunge in shipments."

This photo provided by LG Display Co. shows the company's OLED panel manufacturing plant in Guangzhou, China. (PHOTO NOT FOR SALE) (Yonhap)

Analysts predicted that the two display makers are to suffer a heavier toll in the second quarter as the virus impact on major markets, such as Europe and North America, appear to be pronounced.

"LCD panel prices are to start dropping in the second quarter due to a plunge in TV demand and a supply recovery of Chinese LCD makers," Kwon said. "Demand for LG Display's plastic OLED could increase in the second half, but there are still uncertainties over its clients' new product releases."

kdon@yna.co.kr
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