UPDATED. 2024-04-11 10:05 (목)
LGD losses to deepen in 2Q on collapsed deal with Huawei
LGD losses to deepen in 2Q on collapsed deal with Huawei
  • Jongjun LEE
  • 승인 2019.06.20 10:00
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Display maker's OLED panels fail to make cut for P30 Pro
Equipment being brought into LG Display's E5 production lines in Gumi in July, 2016.
Equipment being brought into LG Display's E5 production lines in Gumi in July, 2016.

LG Display’s second quarter operating losses are expected to deepen from the first quarter after failing to close a deal for supplying OLED panels to Huawei’s P30 Pro smartphones, according to financial sector sources on June 18.

LG will have to shoulder most of the costs involved, they forecast, since the contract fell through at the last minute on account of quality issues.

Industry watchers now expect quarterly losses to stand at 300 billion won ($253.8 million), which is bigger than the 132 billion won in the previous quarter.

In particular, Mirae Asset Daewoo Securities’ analyst Kim Cheol-joong who was nearly right on the dot in his forecasts for the display maker’s 1Q operating losses in April, expect LG Display to record an operating loss of 295 billion won.

“There will be a temporary surge in costs related to flexible OLED panels,” he explained, referring to the costs LG Display will likely incur due to the faulty parts. The firm is now in talks with its suppliers for the panels to discuss compensation.

Huawei’s P30 Pro was launched in March this year. LG Display, along with BOE, had been included in the phone’s internal screen software, leading to reports from China that the South Korean manufacturer was a supply partner. The press is now saying that LG Display seems to have decided against supplying smartphone OLED panels to companies other than Apple or LG Electronics.

“This is absolutely untrue,” said an LG Display company official.

The LG affiliate's smartphone display business has been declining on both intensifying competition and deteriorating market conditions. Market research firm IHS Markit data showed that LG Display shipped 12 million such panels in the first quarter of this year. This reflects a 34% decline year-on-year, and the lowest quarterly shipment since 2010. Sales were down in both LTPS LCDs and flexible OLEDs.

Overall, the display maker ranked 6th in terms of global sales with a 7.7 percent market share, down from 3rd place in the same period last year with an 8.1 percent stake.
LG Display currently mass produces flexible OLEDs from its E5 production lines in Gumi, and E2 lines in Paju. The panels that didn’t make Huawei’s cut appear to have come from E5, which has a monthly capacity of 15,000 panels at its 6th generation production line. Local display equipment maker Sunic System provided the deposition equipment.
Beginning in Q3, LG Display plans to mass produce OLED panels for automobiles from the E5 lines.

Meanwhile at the E2 lines in Paju, the company plans to produce flexible OLED panels for Apple watches. Displays for the Watch Series 4 that will be the first batch using LTPO TFT technology, is currently being produced here.

The E6 lines in Paju where LG Display is churning out flexible OLEDs for Apple’s iPhones, will begin mass production in the latter half of this year. The deal will be an opportunity to make a turnaround in the smartphone display business, according to industry watchers.

“Apple has given its stamp of approval to the E6-2 line first,” said one source close to LG Display. The products from each of the lines are to be different, he added.

Monthly capacity is 15,000 for 6th generation panels, with the entire E6 line having a capacity of 30,000 panels a month. All the lines use Canon Tokki deposition equipment.

In 2Q, the LTPS LCDs that LG Display supplied to Apple’s iPhones accounted for roughly 85 percent of the firm’s smartphone display shipments. When the LG unit begins to supply flexible OLED panels as well to Apple, the California-based tech company is expected to take up an even bigger portion of LG Display’s smartphone display portfolio.

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