Three sources said LG Display Co Ltd (034220. KS) would start delivering high-end TV panels to Samsung Electronic Co Ltd (005930. KS) this quarter, helping the loss-making flat-screen maker turn profitable.
Two sources with direct knowledge said LG Display plans to ship 2 million units next year and 3 million and 5 million units in succeeding years. Samsung would likely receive 77-inch and 83-inch WOLED TV panels.
The deal shows how Samsung is expanding into high-end organic light emitting diode (OLED) TVs as Chinese manufacturers compete in the lower end. OLEDs cost roughly five times more than LCDs.
With this contract, Samsung could surpass Sony Corp (6758.T) as the second-largest OLED TV provider.
Analysts said LG Display was negotiating to deliver OLED TV panels to a new client. Reuters reports the Samsung Electronics acquisition first.
Because the deal is private, the sources declined to be named. Samsung and LG Display declined to comment.
LG Display shares rose 2.4% after the Reuters story. Samsung’s 1.7% increase outpaced the market’s 0.2% gain (.KS11).
Samsung Electronics, the world’s largest TV maker, has been slower than LG Electronics Inc (066570. KS) to adopt OLED TVs, partially due to the high cost of panels.
Analysts expect LG Display to reach full capacity with 2 million OLED panel exports worth at least $1.5 billion, representing 20%-30% of its large-size OLED panel manufacturing capability.
Due to a small customer base and a decline in pandemic-driven TV demand amid rising inflation and a faltering economy, the business has been running its OLED production below capacity.
“LG’s production rate will improve and is likely to reach full capacity next year, helping it lay the groundwork to return to profit,” said KB Securities analyst Jeff Kim.
Due to weakening global demand for electronics, the company has lost money for four quarters since last year’s second quarter.
LG and Sony use their OLED TV panels. In addition, it supplies Apple Inc. (AAPL.O) smartphone displays.
Samsung Display makes OLED panels for Apple and Samsung phones.
Omdia reports that Samsung has 6.1% of the OLED TV market, behind LG Electronics with 54.6% and Sony with 26.1%.
Omdia predicts a 6% growth to $11.7 billion this year and $12.9 billion by 2027.
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