Samsung tipped to shift LCD to OLED business

Samsung has admitted it is scratching its head over how to turn around its ailing TV business, with speculation mounting that it will spin off its LCD wing.

As many other telly makers are hurt by dwindling profits and sales, even the all conquering Samsung has been making a loss on its TV business.

The Korean firm told Chosun Ilbo that it is mulling over which direction to take its LCD business, which has seen various factors such as price competition hurt sales. The global economic situation, too, has directly impacted on demand, with the LCD business incurring $891 million in losses last year alone, writes Reuters.

The manufacturing giant stopped short of admitting that it would spin off the LCD business, though it did little to dampen speculation by refusing to comment. A Samsung spokesperson said that while an internal review is currently taking place, “nothing has been decided yet”.

Samsung has already been talking about returning its OLED business, part of Samsung Mobile Display, back into the fold. It is through OLED production that the firm has its sights set on returning to profitability.

OLEDs are largely used in lower sized displays such as Samsung’s ultra bright smartphones, but both Samsung and its rival LG Electronics have been ploughing money into larger scale products too.  At CES, for example, the pair exhibited eye-watering – and presumably wallet draining – 55 inch displays.

Whether or not it is likely to be spinning off its LCD business Samsung looks certain to lead the way on ensuring OLED screens become viable as a long term replacement.

Bob Raikes, display expert at analyst house Meko, says that it is more likely to integrate the OLED and LCD businesses, rather than to spin off the unprofitable LCD business altogether.

“I wouldn’t expect to see Samsung spin out its LCD business – the company is very vertically integrated and TV production increasingly involves closer cooperation between panel and set maker,” he told TechEye.

“It seems more likely that the SMD (Samsung Mobile Display) and LCD businesses would be combined. I also can’t imagine who would want to invest in an LCD-only business!”

Part of the problem for LCD is that in many parts of the world uptake has already been strong, with countries such as the UK seeing continually lower prices even on larger size sets.

“LCD has reached the end of its strongest growth phase – there is only a limited revenue growth opportunity in the future,” Raikes says. “On the other hand, Chinese makers are starting to enter the LCD market in a much bigger way and that will threaten margins and costs. So display makers have to find ways to differentiate.”

Raikes says that OLED has the potential to be a better display for TV applications than LCD, but with lower costs. If Samsung can get the manufacturing right, he believes, it could potentially have a product that sells at a premium, but can be made for lower cost – “a win/win.”

The good news for Samsung is that it is by far the best placed to capitalise on a shift away from LCD and towards OLED production having already moved ahead of rivals: “At the moment, Samsung has a very substantial lead in small OLED production over all of its rivals,” Raikes said.

“We believe that it also has a considerable technological lead on large OLEDs for TV,” he continued. “If the company can bring volume manufacturing of large OLEDs for TVs to a high yield reasonably quickly, it could find a really significant improvement in its profitability.”