LG Display is planning to restart operations of its organic light emitting diode (OLED) panel plant in Guangzhou, China this month, people familiar with the matter said.
The company has already secured the necessary yield rate for mass production sometime during the second quarter, they said.
However, is was mulling the issue of profitability once the factory restarts due to lower-than-expected demand for large-sized OLED panels.
Once the factory begin operations, LG Display has to put in depreciation costs into its books. If there is no demand while the panels are being produced, it will only exasperate the company’s losses.
Nineteen companies so far has announced that they will launch OLED TVs, which will be a boon to LG Display as it is the sole producer of the needed panels. The Guangzhou factory has a monthly production rate of 60,000 sheets. However, companies such as Xiaomi have yet to specify when they will launch their TVs.
People familiar with the matter said LG Display saw lower-than-expected demand for OLED panels in the second quarter of the year due to the COVID-19 pandemic, forcing the company to produce less of the panels at its factory in South Korea. The delay in the Guangzhou plant restarting is likely also due to this, they said.
Some of the subcontractors to LG Display have also yet to send their engineers to Guangzhou.They will likely be sent once LG decides to increase production rate.
The South Korean display panel maker has previously said it will decide when to restart its Guangzhou plant depending on demand. Company CFO Suh Dong-hee said in April at the company’s conference call that COVID-19 will cause a 10% decline in demand for large-sized OLED panels.
When the Guangzhou plant goes live again will also determine when LG Display will began investment into its 10.5th generation P10 line at Paju, South Korea. The company has previously said the new factory will go live after 2023.
LG Display has posted five straight quarters of losses as of the first quarter of 2020. It marked an annual loss of 1.3 trillion won in 2019.