90% LCD Module Supplying from China

On May. 20^th., the ChosunBiz reported that, Samsung Display will wind up its LCD business this year and change its TV strategy. Samsung is expected to rely on China for much of its future supply of LCD panels. Samsung Display will close its LCD business with the commercialization of quantum dot (QD) displays, the report said. Although small and medium-sized displays used in smartphones have been converted to organic light-emitting diodes (OLEDs), but demand for large LCDs used in TVS is still growing.

Samsung Display originally planned to end its LCD business by the end of 2020, but Samsung Electronics asked the company to maintain the LCD business until this year because it 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 China Star Optoelectronics Technology. Co.,Ltd, and its domestic plants in South Korea continued to reduce production. Currently most of Samsung’s products are LCD TVs which took up much of the sales.

Industry experts predicted that Samsung Electronics will depend on China for more than 90 percent of its LCD panel supply if Samsung Display pulls out of LCD Module market.

As LCD screen prices are on the decline, Samsung Electronics is expected to have an advantage in the supply price negotiation for the time being. However, the problem 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).

Furthermore, Samsung Electronics seems to be lukewarm about switching 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 the first quarter Financial report, Samsung Display has actively announced its QD display, but nothing about QD-OLED TV on sale,  indicating that it intentionally omitted the next generation display TVS it is selling.

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 consider that Samsung’s TV strategy is still highly likely to be influenced by Chinese LCD display makers. In the first quarter of this year, Samsung Paid 2.48 trillion won to China’s TCL, AU Optronics and BOE for LCD panels, an increase of 600 billion won from 1.86 trillion won in the first quarter of last year. And LCD 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 LCD panel supply price negotiations, its performance will suffer,” an industry source said.

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