LG Display has announced a significant drop in its spending for next year to make up for dwindling demand for flat screen TVs and PCs.
The Korean panel maker said that it will only be splashing out $2.8 billion in 2012, meaning a 33 percent drop from its original budget for the year. The announcement comes not so long after it was announced that this year’s expenditure would also be cut.
This means 2012 will see the lowest budget since the midst of the global recession, when$2.6 billion was spent.
It is thought that the drop in spending is due to demand for TVs and PCs dropping rapidly recently.
With many developed markets having already seen massive take up of large flatscreens it has been difficult to push new sets. Valiant efforts to persuade the public they need 3D sets for example have of course been made, but demand is still down.
The PC market has also been stagnating of late. As tablets continue to increase in popularity there has been a drop in popularity, with HP deciding to ditch its PC arm recently.
This has meant that LG Display’s panel market rival Samsung has also declared plans to lower spending, with no plans for an LCD factories next year.
AUO and Chimei Innolux are also feeling the heat in the TFT-LCD market and have looked to adjust capacity accordingly.
The outlook for the rest of the year now looks poor, the Wall Street Journal writes, even throughout the usual boom of the holiday shopping season.
LG Display CFO James Jeong said that he doesn’t expect demand will ramp up until at least the early part of next year. With this in mind the firm will lower production right through to July in order to reduce inventories at normal levels, also keeping prices high presumably.
According to Displaysearch panel expert Paul Gray there are a variety of factors that have conspired to leave the panel in an unfavourable position.
“One of the reasons is that in developed markets people have already upgraded to LCD screens from CRT, and have reached the maximum size of screens that is acceptable,” he told TechEye.
“The market is now moving to other areas such as South America and there is less money available to be spent there. In developed markets people are less interested in upgrading to ever bigger screen sizes too.
“So many in the panel industry are now wondering why they would be borrowing money for extra capacity when the market is changing.”
Attempts to entice customers with new features have often fallen flat despite attempts to ram features like 3D down consumer’s necks.
“The industry is looking for a way to shorten the replacement cycle now that the market has matured. But they haven’t found it.
“Ramming 3D into the market where there is little content other than big blockbusters has not worked. Now there is an attempt to popularise the hardware – Samsung has released a 3D TV for under $500 – but there is little interest from the public.
“In this sense there has been a failure to excite the public with new technologies, and a failure to find something which the public actually want rather than just a shiny new feature.”
According to Gray the industry will continue to face some long term problems with over capacity as China does not look set to halt its own expansion into the panel industry.
“China is trying to develop its own LCD panel industry and it is giving extremely favourable lending prices to firms in its domestic industry. This means that China could increase capacity regardless of supply and demand.
“This then leads to a strategic dilemma for others in the market such as the Korean firms. If you don’t invest in overcapacity then you are out of the market, but if you do, you are cutting your own throat with debt.”