LG Decides To Invest Nearly $1 Billion In OLED Plant; Q2 profit Beats Estimates

LG Display on Thursday said it will invest nearly $1 billion to build a fourth organic light-emitting diode (OLED) display factory, pinning its future firmly on the high-end next-generation technology.

The world’s biggest maker of liquid crystal displays (LCD) later said April-June operating profit tripled on year, marginally exceeding analyst estimates. But it said overall panel shipments are likely to be flat in the third quarter from the second, and that it expects average panel prices to decline.

OLED investment could give the South Korean manufacturer a leg up against competition in markets as varied as television sets, smartphones and automotive devices. The differentiation could be critical to long-term success as low-priced Chinese rivals boost LCD panel production.

“LG Display’s investment will help pioneer future display technologies such as foldable displays and large-size auto displays,” the company said in a statement about its new plant, to be built in South Korea at a cost of 1.05 trillion won ($900.67 million).

LG Display and Samsung Display are the only firms in the industry capable of mass-producing OLED screens, which are physically more flexible and consume less power than current LCDs.

The firm said as early as last year that it aimed to add capacity for OLED screens for small and mid-sized devices as clients such as sister firm LG Electronics and Apple increasingly use the screens on products like smartphones or smartwatches.

Its latest investment will begin in the third quarter, with the plant scheduled to start mass production of small and mid-sized OLED screens in the first half of 2017. Monthly capacity will be double that of its current small and mid-sized OLED display line.

In its earnings statement later on Thursday, LG Display said it would improve cost competitiveness in OLED by converting some large-LCD production capacity for OLED in the second half, and increase advertising to grow the market.

LG Display reported operating profit of 488 billion won for the second quarter, beating the 469 billion won average estimate of 31 analysts in a Thomson Reuters I/B/E/S survey.

Profit was buoyed by sales of high-margin screens for large TVs and premium mobile devices, the firm said. But revenue fell slightly short of analyst estimates as broadly weaker demand for information technology-related devices weighed on panel prices.

The spectre of declining panel prices left LG Display shares ending 1.5% lower after the earnings release, compared with a 0.02% rise in the broader market.