A green light has turned on for LG Display to achieve a profit for the second straight year. After falling into the red starting in 2022 amid Chinese companies' low-price offensive and a market slump, profitability has improved since the second half of this year, making a full-year profit all but certain. A business overhaul centered on organic light-emitting diodes (OLED) is cited as the main driver of the rebound. The OLED market was estimated to grow about 5.0% this year in shipment terms, and it is expected to see even stronger growth next year.
According to a recent report by market research firm Omdia on the 17th, the display market next year is forecast to decline about 2% from this year in shipment terms. However, the OLED market is expected to grow 6.1%. This year, shipments of OLED panels are estimated to have risen about 5.0% from a year earlier to 1,043.07 million units, and they could expand to 1,106.26 million units next year, the analysis said.
In particular, growth in OLED TV panels, where LG Display holds more than 80% of the total market, is expected to stand out. OLED TV panel shipments are projected to form at 8.73 million units next year, up 11.9% from 7.8 million units this year. In April this year, LG Display fully exited the large liquid crystal display (LCD) panel business and reorganized around OLED.
The automotive display, desktop (PC), and smartphone markets that LG Display has targeted as future growth engines are also expected to grow around OLED. In particular, the automotive OLED panel market this year is estimated to form at 167,990 square meters, up 56.7% from a year earlier. Omdia projected an even higher 64.3% growth rate next year. In shipment terms as well, the automotive OLED panel market next year is expected to record a strong 63.0% growth rate.
◇ OLED-centered business structure "taking hold"
LG Display, which led the LCD market and achieved growth, began to wobble in the 2010s. Panel prices trended down due to low-price offensives by local companies backed by massive support from the Chinese government. LG Display abandoned LCD competition with Chinese companies and pushed to reshape its structure around OLED, but the resulting massive capital expenditures sent its results plunging. The cumulative losses from 2022 through last year totaled 5.1558 trillion won.
LG Display ended its loss-making streak that continued through the first half of this year in the third quarter. The result came from increasing the production share of high-value-added products centered on OLED and continuing aggressive cost improvements. OLED accounted for a record high 65% of total sales in the third quarter. The shift from LCD to OLED has effectively entered a stable phase. During this period, the sales mix by major product was ▲ TV panels 19.1% ▲ IT panels such as monitors and laptops 37.3% ▲ mobile panels such as smartphones and smartwatches 34.9% ▲ automotive displays 8.7%. In its third-quarter earnings release this year, the company said, "As OLED panel shipments expanded across all product lines, sales rose 25% from the previous quarter."
A display industry official said, "Regardless of the overall display market conditions, the growth trend in the OLED market that appeared from the second half of this year is likely to continue into next year," adding, "Since LG Display returned to profit this year in a market that grew around 5% to 6%, profitability will improve by a larger margin next year."
◇ "Likely to achieve more than 1 trillion won in profit in 2026"
Brokerages also say LG Display's profitability will accelerate in step with the growth of the OLED panel market. LG Display's fourth-quarter consensus compiled by FnGuide is sales of 7.2232 trillion won and operating profit of 425.6 billion won. Accordingly, the securities industry projects a full-year profit of 776.6 billion won this year. Next year's consensus also comes to sales of 27.0381 trillion won and operating profit of 1.3144 trillion won.
At the LG Group level, the focus on the automotive electronics and electrical equipment business is also cited as a factor that will bring forward LG Display's improvement in results. LG Display, along with LG Electronics, LG Energy Solution, and LG Innotek, has entered the vehicle components business to create synergies. In particular, LG Display is cooperating with LG Electronics in developing automotive infotainment and aims to expand display supply as a strategy.
It is also positive that most of the depreciation recognition, which can secure cost competitiveness for OLED panels, is nearing completion. According to the display industry, depreciation recognition for LG Display's Paju OLED plant will mostly end this year. At the Guangzhou, China, OLED plant, depreciation recognition for more than half of the facilities ended in July. By around the end of the first half of next year, depreciation recognition for the remaining production lines will also be wrapped up, creating a structure to secure cost competitiveness.
Ricky Park, senior analyst in Omdia's display research, predicted a decline in TV prices as depreciation ends for 8.5-generation OLED plants, saying, "As production cost reductions get into full swing, consumers will be able to enjoy large displays at attractive prices."
Kim Dong-Won, head of the KB Securities research center division, said of LG Display's future results, "Since the third quarter of this year, it appears to be escaping a three-year loss-making structure by expanding supply centered on premium models to a strategic customer in North America," adding, "As the share of OLED sales expands, the profitability structure has improved significantly compared with the previous LCD-centered business structure, and the expense structure is also expected to improve as OLED depreciation decreases."