Recently, LG Group's LG Electronics and panel makers LG Display (hereinafter referred to as 'LGD') have released the latest earnings.
From the fourth quarter of 2017, LG's household appliances and air solutions segment and panel revenue declined, with LGD declining 95% from a year earlier, its lowest level in nearly two years.
It should be noted that, although LG entered the Chinese market for 21 years, but home appliances in the local market did not form a certain competitive advantage, the main product market rankings later by.
Interviewees pointed out that the performance of LG appliance products in the Chinese market is poor, mainly due to the rise of local appliance enterprises to squeeze the living space of foreign brands.In addition, LG's business strategy in the Chinese market also has many problems.
In addition, respondents analyzed that TV panel supply is expected to exceed demand in 2018, while TV panel prices will bottom out, which will have a negative impact on LGD's performance.
LGD side told reporters that the panel prices continued to decline, the exchange rate changes, OLED field investment is the main reason for the decline in profits in the face of downward trends in the industry, the company will continue to provide differentiated innovative products and technologies, while constantly adjusting the high-end OLED Market positioning, expand the market size of OLED.
Market space squeezed
Recently, LG Electronics released fourth quarter and full fiscal year 2017. According to the report, LG Electronics reported 17 trillion won ($ 15.98 billion) in fourth quarter revenue in 2017, an increase of 15% over the same period of last year. Its operating profit was 366.6 billion won (about 345 million U.S. dollars), turning losses into profits year-on-year.
In 2017, LG Electronics recorded 61.4 trillion won ($ 57.716 billion) in revenue, an increase of 10.9% over the same period of previous year. Its operating profit was 2.47 trillion won ($ 2.222 billion), an 85% increase year-on-year The highest profit since 2009.
It should be noted that, LG Electronics several major business performance in the fourth quarter there is a significant performance differentiation.
Among them, the home entertainment business in the fourth quarter of 2017 revenues of 5.48 trillion won (about 5.151 billion US dollars), an increase of 14%; operating profit of 383.5 billion won (about 360 million US dollars), an increase of 134% .
However, the household appliances and air solutions sector is facing an increase in revenue and a profit increase of 4.33 trillion won (about $ 4.07 billion), an increase of 7% over the same period of last year. Operating profit dropped to 80.7 billion won (about 76 million USD).
In addition, mobile communications revenue increased to 3.07 trillion won (about 2.886 billion US dollars), but business losses are still as high as 213.2 billion won (about 200 million US dollars). LG Electronics said that the strong rise of China's smart phone brand is mobile In fact, LG mobile phone performance has been criticized by the market.It is understood that, in the past two years, LG Electronics, the smart phone sector only one quarter of earnings.
Reporters noted that, despite entering China for 21 years, but LG's home appliances have not yet consolidated its market position.
Recently, GFK, an international research organization, released the ranking of domestic smartphone sales in China's mobile phone market in 2017. Huawei topped the list with a sales volume of 102 million. Followed by well-known brands such as OPPO, vivo, Apple and Xiaomi, LG Sales top 10 list outside.
LG Electronics ranked relatively lower in the China market.According to the recent data list released by Alvin Cloud, in 2017, LG Electronics did not appear in the Chinese market top five brands of refrigerators, washing machines, air conditioners Standings.
In addition, LG TV in the Chinese market is also not optimistic about the situation.According to market research firm HIS statistics, as of the third quarter of 2016, China's TV brands in the Chinese market share has risen to 84.3%, while Samsung, LG and other South Korea For the first time, the share of color TV brands in China's color TV market fell below 5% to 4.5%.
According to AVC omni-channel data, in the Chinese OLED TV market from January to August 2017, the retail volume share of Skyworth reaches 39% Significantly higher than LG's 23%, followed by Konka and Sony's market share was 14%, respectively, 13%. Insiders told reporters that in 2018 the major OLED TV brands in the Chinese market will be more competition Intense, to grab more market share.
'In the past five years, Japan and South Korea appliance companies in the Chinese market are going down, poor performance, LG is no exception.' Appliance industry watcher Liu Buchen told reporters that LG and its rival Samsung compared to the brand power is weaker , The product does not have any big competitive advantage.
For LG appliance products in the Chinese market poor performance, Liu Buchen pointed out that the main reason is the rise of Chinese local brands squeeze the living space of foreign brands.In addition, Liu Buchen believes that LG in product manufacturing, market grasp, marketing, and so also Did not do well.
LG's operation in the Chinese market, people feel a little too rigid, can be said that is not enough atmosphere, not with the changes in the market, consumer demand changes, well to deal with. "Liu Buchen said.
Panel downward pressure highlights
In the fourth quarter of 2017, LGD's performance also fluctuated greatly. Operating profit dropped 95% YoY, setting the lowest level in the past two years.
'The global liquid crystal panel entered the downward trend in the second half of 2017 and experienced a sharp decline. In addition, the strong rebound of KRW in the second half of 2017 caused the LGD's overseas income to be greatly affected and its profitability was affected. LGD said to reporters, in addition, the company expanded OLED business in 2018, invested in higher R & D and marketing costs, but also makes spending rise.
According to Orvite cloud related reports show that the beginning of the third quarter of 2017 TV panel prices inflection point, panel prices began to decline, the third quarter TV panel profit ratio fell to 8.2% .In the fourth quarter, TV panel Demand has been warming, the size of the decline began to slow down, TV panel makers profit ratio of 4.2%.
Industry down, as the world's largest panel maker LGD naturally bear the brunt of the first, and in 2018, focusing on large-size TV panels LGD will face more severe market challenges.Ovi cloud network analysis from the fourth quarter of 2017 At the end of 2018 and early performance, although the overall TV panel decline trend has narrowed, but did not stop, is expected TV panel makers in 2018 compared to the 2011 profit ratio will be greatly reduced.
LGD said that in the future, the company will continue to maintain its strategy of providing differentiated innovative products and technologies and provide differentiated and innovative products. In particular, under the conditions of China's consumption upgrade and other factors, the Company will continue to innovate Product development and leading the high-end market, thereby improving profitability.
In an interview with reporters, Orville cloud display devices and systems research division manager Zhang Chengzheng pointed out: '2018 expected TV panel shipments in 2017 increased by nearly 1 million, while the whole shipments are expected to increase only 30 Million units, on the whole, supply exceeds demand.
Zhang Cheng is that the TV panel prices will maintain the downward trend at the beginning of the year, follow-up price trend also need to see the new line climbing is smooth, if successful, the whole year will be in oversupply situation, the panel price is difficult to reverse, but if the production Line climbing is not smooth, then there may be ushered in the second half of the price stabilized or even reversal of the situation occurred.
As for the LGD performance will bring any impact, Zhang Cheng is analyzed, LGD in 2017 is still the world's largest TV panel shipments panel makers, panel prices will fall to the bottom in 2018, which will inevitably bring negative results LGD Influence, 'but LGD overall product structure is better, in each panel plant is a relatively profitable one, so in each panel factory, is not expected to be the one who made the most losses.'
It is noteworthy that, LGD OLED panel in recent years continue to increase investment.LGD said it will be for market conditions, continue to adjust the high-end market positioning, expand the OLED market, thereby increasing sales this year; the same time, will Improve production efficiency through technology upgrades. "The expansion of the market scale and the reduction of costs will enhance the Company's profitability in the OLED field."
LGD recently announced that it will build a large-size OLED panel factory in Guangzhou.When a reporter asked about the next move in the Chinese market, LGD said: 'Recently, the company's key work will be placed on the construction of Guangzhou OLED production line, no more Further investment plan.