Apple supplier LG Display has reported a second quarterly loss and cut its investment plans by $2.7 billion up to 2020, on mounting concerns for the smartphone market (via Reuters).
LG shares fell 7 percent after it posted faster-than-expected declines in the price of display panels and an unpredictable outlook. The announcement follows news that another Apple supplier, Taiwan-based TSMC, also scaled back its revenue and investment estimates over uncertainty in the mobile market linked to risks of oversupply and unbalanced competition.
Crucially for Apple, LG said the $2.7 billion investment cut would not impact the speed of the Korean firm’s transition from LCD to OLED production, although existing LCD operations could be affected.
The investment cut would not impact plans to “speed up the shift” from LG’s mainstay liquid crystal display (LCD) business toward next-generation organic light-emitting diode (OLED) panels, the company said.
Plans to invest about 20 trillion won in OLED panels by 2020 remained unchanged, meaning the cuts would apply mainly to LCD operations.
LG’s traditional LCD business, which analysts estimate makes up more than 90 percent of its sales, is reportedly struggling with falling prices as fast-growing Chinese panel makers ramp up their capacity.
Against that backdrop, Apple is investing $2.67 billion in LG’s OLED panel business, with the Korean firm said to be building a production line dedicated to iPhone orders only, as part of its agreement with Apple.
Separately, LG is believed to have signed a deal with Apple to supply both LCD and OLED panels for the company’s 2018 range of iPhones.
Apple is expected to launch two OLED iPhones (5.8 and 6.5 inches) and one 6.1-inch LCD iPhone later this year, with the LCD device to be positioned as a low-cost option alongside the two more expensive OLED devices.
The contract should see LG ship around 20 million LCD smartphone panels and around 3-4 million OLED panels to Apple in 2018. LG also hopes to secure the majority of 6.5-inch panel orders from Apple in 2019, which will see the firm ramp up its OLED shipments to 10 million units in the year.
LG’s OLED panel business has yet to make a profit, but the company said it would be positive for earnings in the third quarter.