The global economic downturn has left a serious dent on some of the world's biggest technology firms, but not LG Display, South Korea's flat panel maker. The company did go through its share of lows from the end of last year to the beginning of this one, posting two straight quarters of losses due to weak panel prices and sinking demand for electronics. But starting in the second quarter, it rebounded, moving into positive territory as it continuously beat market forecasts. The world's No. 2 maker of liquid crystal displays (LCDs) earned 302 billion won in the April to June period, which was a sharp turnaround from a 255 billion won loss the previous quarter and the first profit it saw in three quarters. In the third quarter, LG Display reported 559 billion won in net profit, almost doubling the figure from the previous year, which stood at 295 billion won. The global slump significantly reduced global demand for LCD panel-equipped consumer electronics, such as televisions and computers. But strong demand for TV panels from China and Japan, coupled with a shortage of raw materials, largely helped push figures up again. ``The LCD industry was fortunate enough to climb out of the downturn quicker than others in the technology sector,'' said Lim Seung-beom, analyst at Hanwha Securities, who forecasts that demand will continue to grow firmly. And to meet the rising need, LG Display began mass production at its eighth-generation LCD production line in Paju, about 40 kilometers north of Seoul, in March. The new plant can create pieces of glass measuring 2,200 by 2,500 millimeters, enough for eight 47-inch panels, six 55-inch panels and 18 32-inch panels. The company said it plans to invest 3.27 trillion won to add another eighth-generation production line to its factory by the second half of 2010 to up its monthly output to 60,000 sheets. While recovering demand was a crucial factor in boosting LG Display's stellar third-quarter performance, company CEO Kwon Young-soo added that a rise in panel prices also provided a nice lift. ``LG Display posted strong performance in the third quarter, thanks mainly to increased demand and higher panel prices,'' he said. ``Investment in new production lines and customer-oriented marketing also contributed to the good results.'' Price changes are significant in determining the profitability for flat-panel manufacturers as panel prices are mostly dependent on demand and supply cycles. Since May, the LCD industry has been boosted by steep price rises of displays used in televisions. The price of an LCD panel for a 32-inch TV climbed to $200 early this month from $160 in February, according to WitsView Technology Corp., a Taiwan-based researcher.
Panel prices are set to fall due to the seasonal downturn and oversupply after companies increased their output, but the price drop won't be as severe as expected, analysts say.
``I don't think panel prices will plunge in the coming quarters as much as the market fears,'' James Kim, an analyst at Nomura Securities, was quoted as saying. ``Demand appears to be stronger than expected, given China's buying spree during the recent holidays and Intel's optimistic view. I see more upside room for LG Display share prices.''
Plus, the glass shortage that was caused by an earthquake in Japan in August was expected to be normalized in October, but the recent power outage in Taiwan will likely delay the balance of supply-demand until January at the earliest.
An electricity failure at a Corning production plant in Taiwan negatively impacted the level of glass supply to LCD makers.
Analysts say the recent power outage accounts for around a 4 percent drop in LCD's global supply.
Keeping these factors in mind, LG Display officials express optimism about the company's short-term performance.
``The decrease in panel prices is expected to be gradual,'' Jeong Ho-young, chief financial officer of LG Display, said at an investor meeting, adding that the oversupply this year won't be as severe in depth than in the previous year.
He said any oversupply challenge will still help widen the gap between competitive and non-competitive firms.
``In the fourth quarter, we estimate an upper single-digit increase in production,'' Jeong said.
LG Display invested about 3.5 trillion won this year, he said, adding that almost the same amount will be invested in 2010 in new plants and equipment, including the expansion of sixth-generation plants.