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Samsung mulls LCD unit spin-off

Posted: 14 Feb 2012 ?? ?Print Version ?Bookmark and Share

Keywords:LCD panel? OLED? LDC spin-off?

In a move that surprised many, Samsung Electronics Co. Ltd has revealed that it is considering spinning off its LCD flat screen business. The flat-screen unit has been making losses for the South Korean electronics giant.

Samsung was originally planning to move its components business toward OLED displays, which is believed to be the next-generation technology that will replace LCD TVs. Some analysts were expecting the company will merge its OLED business with the LCD operations. This way, Samsung will be able to use a portion of the LCD production capacity in making new OLED displays.

Samsung's surprising move only highlights further the severe market conditions the LCD industry is faced with. Japanese companies, specifically Sharp Corp. and Hitachi Ltd, have also cut their LCD manufacturing operations. Sony Corp.'s troubles in its TV business compelled the company to cut its LCD output at its Western Japan plant. Samsung and Sony have also just ended their LCD joint venture. Another South Korean panel maker, LG Display, has also posted losses for its fifth consecutive quarter.

LCD on a steep downward path
It's not looking good for the LCD sector as companies continue to post losses and cut production. Read other stories related to this topic:
Sharp cuts LCD panel output
Hitachi stops TV manufacturing
Poor economy cut LCD shipment in October

"A spin-off will allow Samsung to focus more on OLED and also broaden its LCD customer base to companies that have shunned Samsung due to the fact that they are in direct competition with it in finished products such as televisions and computers," according to Seo Won-seok, an analyst at Korea Investment & Securities.

BNP Paribas expects a spin-off will also have negative impact on Taiwanese LCD makers as Samsung may also reduce panel purchases from them to help its own spun-off operation. The firm also estimates that Samsung currently sources 40 percent of its panel requirement internally and buys the rest from companies such as AU Optronics Corp., Chimei Innolux and Sharp Corp.

The shift to OLED
Samsung has announced this month that it is taking over the operations of Samsung Mobile Display (SMD), an OLED joint venture it formed with its subsidiary Samsung SDI. Compared to LCD screens, OLED displays are thinner, more power-efficient and have better clarity and color contrasts.

Samsung plans to use OLEDs in its large-sized TVs. This could increase the company's OLED revenues six fold or around $23.35 (26.3 trillion won) by 2014, said BNP Paribas.

Some are saying that Samsung may not completely buy SMD as this could cost around $1.4-1.8 billion (26.3 trillion won). Instead, the company may opt to just transfer its LCD business to the OLED joint venture and receive a significant number of new SMD shares.

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