Samsung Display will continue to supply LCD panels until the end of 2022, the Nikkei reported on Tuesday, after postponing its original deadline to stop producing LCD panels due to an unexpected surge in demand.
LCD panel prices have continued to rise since last June, and it is not clear when prices will peak. It is understood that Samsung Electronics' TV business unit has asked Samsung Display to maintain LCD production due to difficulties in procuring LCD panels.
Samsung Display had planned to stop LCD panel production last year, but the company may now keep the L8-2 production line running until 2022.
Another production line at Samsung Display, L7-2, which makes LCD panels, stopped production in March and equipment on the production line began to be dismantled in early April. The production line will be converted to OLED panels for mobile phones, as well as next-generation panels for televisions.
Samsung did not realize at the beginning of the COVID-19 outbreak that the demand for PCs would soar with the outbreak of remote business opportunities. At the same time, government policies to relieve the economic downturn caused by the epidemic and release discovery money have created a wave of demand for consumer electronics, such as large-size televisions. Declining global supply of panels has prompted Samsung to ask its subsidiaries to extend production of LCD panels.
But the decision to extend production of LCD panels is a mixed blessing for Samsung Display. Pleasant because the surge in demand and panel prices are surprising. Samsung Display, on the other hand, has completed the depreciation of older equipment, so it can increase its gross margin by continuing to use these equipment and make a strong profit.
On the other hand, the shortage of chips is hitting global panel suppliers, whether in China or South Korea. Even though Samsung has a foundry division, it supplies most of its capacity to higher-margin businesses, such as mobile phones and automotive chips, and drives ICs that have relatively poor margins make them lower down the production line. So how Samsung Display can demand sufficient chip supplies from its parent company will be an important issue.
