One day in the spring, in the main production area of LG Display, when CEO Han Xiangfan appeared in front of 1,000 employees, he was determined to convey a firm message.
He put on his goggles, picked up a heavy hammer and smashed a liquid crystal display (LCD) panel.
Reuters reported on September 13 that the symbolic meaning of this is self-evident: LCD panels, which have supported LG monitors for many years, are being phased out by the industry. The future of LG displays will be pinned on newer technologies. - Organic Light Emitting Diode (OLED).
'I have never seen him do this before,' said a company executive who was present at the time. 'His presentation shows a determination to survive this crisis.'
CEO of LG Display Company smashes its own LCD display. (Reuters)
According to the report, in many respects, the difficult situation of LG monitors is caused by itself. Less than a year ago, LG Display earned huge profits by virtue of its leading position in the LCD panel market for TVs, computers and smart phones. The company sends a variety of benefits and bonuses to employees.
But LG Display misjudged the market situation: Chinese competitors caught up strongly, LCD panel prices plummeted at the beginning of this year. The company's profit from 2017 turned into a serious loss in 2018. LG Display suddenly announced in July, The investment plan to 2020 will be cut by 2.7 billion US dollars.
According to reports, LG Display did not announce the overall or previous capital expenditure target, but according to Eikon data, the company had about $6 billion in capital expenditure in 2017.
The troubles encountered by LG monitors highlight the risks inherent in the highly competitive industries, which require large-scale capital investment to support.
'LG monitors seem to have made a major misjudgment to the LCD industry. They can't correctly judge the timing of the withdrawal when they can see that Chinese opponents are catching up quickly,' said Xin Wing Securities analyst Lee Won-sik.
'We expected LCD prices to fall last year, but did not expect the price to fall so much, so the rate of decline is so fast.' A LG monitor executive admitted. The LG monitor director, who asked not to be named, told Reuters. Said: 'The customer has been asking for a price cut, but we have been slow to act until it is too late.'
According to reports, Han Xiangfan has been a strong profiter for five consecutive years since he became CEO of LG Display in 2012, thanks to Apple's strong orders for LCD panels, and LG Electronics' demand for mobile phones and TV panels is very strong. LG Electronics owns more than one-third of the equity in LG Display.
LG displays are also investing in OLED displays. Unlike LCD displays, OLED displays do not require backlighting, can present more natural colors, consume less energy, and can be bent and folded.
But this technology is more expensive. Most of the revenue of LG monitors comes from the LCD business. Until the recent capacity reduction, the company has eight LCD production lines in Korea, one in China.
The report said that when the LG display developed smoothly, the Chinese company headed by BOE also invested heavily in LCD production capacity.
According to IHS Markit, by January 2017, BOE has become the number one supplier of LCD monitors over 9 inches, accounting for 22.3% of total shipments, surpassing 21.6% of LG monitors. This is the first time for Chinese display manufacturers. Take the first place.
8K TV exhibited by BOE. (Xinhua News Agency)
By the beginning of 2018, the price of many types of LCD screens plummeted. Taking the 50-inch LCD TV display as an example, according to IHS Markit, the price in August fell 32% from the same period last year.
A Samsung monitor executive said that the company has begun to withdraw its LCD display business several years ago. Since 2010, it has shut down South Korea's old LCD display production line. The company currently has only two LCD factories in Korea, in China. There is one. Samsung Display is the display business of Samsung Electronics, and is the biggest competitor of LG Display in Korea.
However, LG monitors have been caught off guard, and are now aggressively reducing LCD production capacity. Since the last year, three LCD production lines have been closed, and a new production line construction plan has been abandoned.
Company sources told Reuters that LG Display also launched an 'emergency management system' in April to inform employees to take lower-priced flights and reduce team meals. Cash flow became a concern: Eikon data shows that the company is second The quarterly cash flow was negative 83.8 billion won ($7.4393 billion) and has been negative for three consecutive quarters.
Three company sources said that the company is not planning to lay off employees because of fear of brain drain, but some employees are disappointed with the reduction in benefits.
According to the report, LG Display now puts all its products on OLED, saying that the company can raise $17.6 billion to invest in OLED business in the next three years. The company expects that this new technology will generate 40% of revenue by 2020. Higher than the current 10%.
Analysts said that with the popularity of OLEDs, LG displays may be extremely good.
The OLED panel produced by LG Display has helped LG Electronics to take the lead in high-end TV products. Some analysts believe that LG Display has been under pressure to lower the price of panel supply and damage its profitability, but the company Deny this statement.
However, the OLED market will certainly face a hard fight. Samsung claims that the company has invested in OLED since 2005. BOE is also entering the OLED market.
Ross Young, CEO of Display Supply Chain Consultants, a research firm, said that LG displays are costly to produce durable OLED TVs, but there are no better alternatives.
Son Young-jun, vice president of public relations at LG Display, said in a statement that the company is the only manufacturer of large-size OLED displays, and the technical expertise of OLEDs is unmatched. He said, 'The potential and prospects of this product are very bright. . '
LG Display said its OLED division will turn a profit in the third quarter. The company also expects LCD prices to remain stable, allowing it to profit from legacy technology before new technology matures.
A company executive said, 'OLED is our answer to this crisis and the solution, so in addition to tightening the belt, pushing the OLED, there is no other way.'
LG merchandise display area uses OLED display TV products.