LG Display braces for slowing electronics demand as lockdowns ease

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One of the world’s biggest makers of electronics displays said it was bracing for lower prices in the second half of the year as the easing of Covid-19 lockdowns hits demand for TVs and other gadgets.

Apple supplier LG Display said on Wednesday that it had swung to an operating profit in the second quarter on pandemic-induced demand for TVs and laptops. However, analysts expected profits at the world’s second-biggest maker of display panels to peak in the third quarter as the digital boom sparked by lockdowns fades on rapid vaccine rollouts in developed countries.

The South Korean company reported an operating profit of Won701bn ($606m) in the April to June quarter, compared with an operating loss of Won517bn a year earlier. Sales jumped 31 per cent year on year to Won7tn.

“IT demand is likely to remain strong in the second half . . . but demand for small-to-mid-size TVs is falling,” Suh Dong-hee, the company’s chief financial officer, told analysts after announcing the better than expected results. “We are planning to operate our business on the assumption that IT panel prices might be partially mitigated and decline.”

LG Display said it was switching LCD production lines for TVs over to IT products, which are in high demand because of component shortages. Apple on Tuesday forecast slowing revenue growth, with the chip supply constraints that have disrupted production of iPads and Mac computers also expected to crimp iPhone sales.

Prices for LG’s mainstay 55-inch LCD panels, which are used in TVs, have more than doubled in the second quarter from a year earlier, according to data from TrendForce.

But panel prices for some products are likely to fall in the second half as people spend less time at home with many countries lifting restrictions. The trend could be exacerbated by increasing supply as Chinese companies boost panel production, analysts said.

“LCD supply is gradually increasing as the chip crunch is slightly easing,” said CW Chung, head of research at Nomura in Seoul. “Panel prices are likely to peak out in the third quarter as demand for TVs, laptops and tablets is likely to fall amid a return to normality.”

However, Kim Young-woo, an analyst at SK Securities, suggested this was not a foregone conclusion, citing the resurgence of Covid-19 infections driven by the Delta variant.

“Demand for TVs and IT products may not be as bad as feared as the Delta variant damps travel demand, but TV demand, following its biggest boom in two decades, is likely to enter a downcycle after peaking in the third quarter,” he said.

The global dominance of South Korean display makers is also under threat, with Chinese companies now the world’s biggest producers of LCD panels.

Chinese groups are also catching up in premium organic light-emitting diode panels. LG Display said on Wednesday that it was considering increasing its capacity to produce plastic OLED panels to meet growing demand for curved display products.