As LG Display stabilizes productivity for TV organic light-emitting diode (OLED) panels and has recently begun matching panel production unit costs to a level similar to high-end liquid crystal display (LCD), the share of OLED in the TV market is expected to expand further. As the entry barrier to launching OLED TVs falls, not only Samsung Electronics and LG Electronics but also corporations in Japan, China, and other countries are expected to increase and diversify their OLED TV lineups. LG Display holds more than an 80% share of the global market for TV OLED panels.
However, Korean TV corporations that have created a profitability gap with Chinese corporations by using OLED TVs as a weapon in the premium market now face a more complicated calculus. While cost savings have become possible thanks to OLED panel price cuts—making a win-win feasible for both the TV and display businesses—the likelihood has also grown that Chinese corporations will encroach on the premium market with mid- to low-priced OLED TVs.
According to the industry on the 9th, the manufacturing cost of LG Display's 65-inch OLED panel fell sharply from $1,000 in 2020 to around $600 in 2024 and is said to have settled at around $500 as of late last year. In addition, for OLED SE (Special Edition), which LG Display developed independently, the price is expected to be set even lower. Despite the OLED panel price cuts, LG Display is projected to secure a profit margin close to 10% on a 65-inch basis.
One of the key reasons LG Display strengthened productivity for large OLED panels is the end of depreciation. Depreciation refers to an accounting treatment that allocates, over a set period, the decrease in value of tangible assets such as factories, machinery, and equipment as an expense. As depreciation pressure eases, cost of goods sold falls and profitability improves. At the same time, there is room to cut prices, which can bolster market competitiveness. Omdia analyzed that depreciation can account for up to one-third of total manufacturing costs.
In fact, LG Display benefited from improved results last year as depreciation for its OLED plant in Guangzhou, China, was largely completed. Last year's depreciation on property, plant and equipment was 3.603 trillion won, down 666 billion won from the previous year. Although sales fell 3% from a year earlier, the cost structure improved, and the company posted 517 billion won in operating profit, returning to the black for the first time in four years.
As know-how in producing large OLED panels has stabilized, high process completeness in terms of Production yield and quality has also been an important factor. An official in the domestic display industry said, "LG Display has steadily lowered the supply price of OLED panels over the past several years and has recently optimized the production process to the point where it can leave sufficient profit while bringing prices down to a level not much different from high-end liquid crystal display (LCD)."
However, while enhanced productivity for OLED panels may appear on the surface to benefit both LG Display, the No. 1 player in large OLED market share, and TV manufacturers, there are also potential risks for the domestic TV industry. In particular, if Chinese TV corporations aggressively expand market share in OLED following LCD, the likelihood of price competition with Chinese corporations will rise.
In particular, as LCD TV panel prices have recently entered an upward trend, the price gap between OLED and LCD is expected to narrow going forward. According to Omdia, the selling price of 55-inch LCD TV panels rose from $115 in Jan. to $118 in Mar., showing a steady uptrend over three months.
The display industry expects the structure to continue in which Chinese display corporations keep up the chase under the technological edge of Korean firms. Park Hyun-woo, an analyst at Shinhan Investment Corp., said, "While the LCD TV market centered on China appears likely to slow, OLED TVs are expected to rise." Park Kang-ho, an analyst at Daishin Securities, also noted, "In the second half, additional reductions in depreciation for large OLED panels and benefits from an expanded share of premium models at a North American client are anticipated."