Samsung Display is expected to rely on China for a large part of its FUTURE SUPPLY of LCD panels as it winds up its LCD business this year and changes its TV strategy, ChosunBiz reported on May 20.
So far, Samsung Electronics has maintained its bargaining power with Chinese LCD suppliers mainly through Samsung Display. The withdrawal of Samsung Display from the LCD market is expected to affect Samsung Electronics LCD business as its main product is LCD TVS.
Samsung Display will close its LCD business following the commercialization of quantum dot (QD) displays, and demand for large LCDS for TVS continues despite the shift from small and medium-sized displays used in smartphones to ORGANIC light-emitting diodes (OLeds), the report said.
Samsung Display is expected to officially exit the LCD business by the third quarter of this year. In a first-quarter conference call, Choi Kwon-young, vice president of Samsung Display, said that "the LCD business will end on schedule".
Samsung Display originally planned to end its LCD business by the end of 2020, but Samsung Electronics asked the company to maintain its LCD business until this year due to concerns that its bargaining power would decrease due to increasing supply from Chinese suppliers.
Since 2010, China's display industry has achieved large-scale production and panel supply prices have fallen sharply. In 2020, Samsung Display sold its LCD factory in Suzhou, China, to TCL Huaxing Optoelectronics, and its domestic plants in South Korea continued to reduce production. Most of Samsung's products are LCD TVS, which account for a large portion of its sales.
Industry experts predict that Samsung Electronics will depend on China for more than 90 percent of its LCD panel supply if Samsung Display pulls out of LCD.
As LCD panel prices are on the decline, Samsung Electronics is expected to have an advantage in the supply price negotiation for the time being. The problem, however, is that Chinese companies are increasing production despite falling demand and are likely to raise panel supply prices again, putting pressure on TV makers. That means Samsung electronics has to deal with Chinese companies without a powerful ally (Samsung Display).
Samsung Electronics also seems to be lukewarm about moving to next-generation displays. Qd-oled TVS, for example, have already been delivered to consumers in North America and Europe, but there is still a long way to go before they are released in Korea. In its first quarter earnings report, Samsung Display actively announced QD display, while Samsung Electronics did not mention any QD-OLED TVS already on sale, which is suspected of deliberately leaving out next-generation display TVS that are currently on sale.
Samsung Electronics is also in talks with LG Display to secure the number of OLED panels, but negotiations have not progressed due to price differences.
Industry insiders believe that Samsung's TV strategy is still highly likely to be influenced by Chinese display makers. In the first quarter of this year, Samsung Paid 2.48 trillion won to China's TCL, AU Optronics and BOE for panels, an increase of 600 billion won from 1.86 trillion won in the first quarter of last year. Panel procurement costs rose to 16.1% of sales from 14.3% last year. During the same period, the operating profit of the DX division fell from 1.12 trillion won to 800 billion won.
"Samsung electronics is trying to make up for declining profitability with high-end QLED and Neo QLED products, but if it fails to lead the panel supply price negotiations, its performance will suffer," an industry source said.
