Samsung, LG holds top spot as LCD TV woes continue

This story was written originally for ZDNet Korea on Aug. 11, 2015.

Samsung and LG held on to their market leader positions in LCD TVs for the second quarter as global shipments dropped 6.4 percent to 48.25 million units on weak demand resulting from a soft global economy and weaker currencies in emerging markets, analysts said.

Samsung held on to its position as the LCD TV leader in the second quarter with 10.5 million unit, a volume comparable to that of the first quarter. Perennial rival LG was runner-up but its second-quarter shipments dropped 5.3 percent due to poor sales in emerging markets and slowing Chinese domestic demand, according to figures released by TrendForce.

Over all dominance in the LCD market by South Korean brands widened slightly in the second quarter as well, with Samsung increasing its lead by 1.4 percentage points to 21.8 percent. Even though the number of TVs shipped by LG was lower, the company’s market share nudged up by a fraction of a percentage point to 14.7 percent.

A global slump in demand for panels is to blame with Chinese makers of LCD TVs hit hardest by low sales during the Chinese Labor Day and the Dragon Boat Festival, according to the TrendForce figures. Shipments by Chinese vendors TCL and Hisense dropped by 19 and 12 percent, respectively.

South Korean analysts pointed to a soft global economic outlook and weakening currencies in emerging markets for the continued slump.

“LG’s second quarter result was poor and Samsung’s profit was marginal. The biggest reason is the overall economic situation and a decrease in TV demand in China,” said Lee Seung-woo, an analyst at IBK Investment & Securities.

Going forward, the soft global economy and an over supply will stunt buying during the holiday seasons in Europe and the US on the one hand and in China on the other, he said.

“In the latter half of the year, numerous holidays across the globe will generate market demand for TVs. China will have sales events related to the Mid-Autumn Festival and the National Day, while the United States and Europe are readying for the Thanksgiving and Christmas season. However, the uncertain global economy and the need to reduce excess inventory mean the stock up demand will not be as aggressive as anticipated,” TrendForce said.

Cutting display costs

But ultimately, as the future of LCD TVs depends on the technology underlying display panels, Samsung is looking to invest in producing larger displays more cost-effectively, according to one technologist specializing in LCD displays.

“In order to maintain the business there is no way except for putting more money in making larger sized [TVs],” said professor Lee Shin-doo of Seoul National University. “Once Chinese makers start producing LCD TVs from 10.5 generation [glass substrates], then there is definitely going to be a huge surplus and the price should go down very quickly. That is why Samsung took so long to make a final decision where they are going to put their investment for the 10.6 generation.”

Generations in display production represents the size of the ‘mother glass’ used to cut out the display panels. The larger glass means more yields of display panels, allowing Samsung to save costs during TV production.

Chinese rivals have already reportedly began investing in 10.5 generation factory lines to take advantage over South Korean and Taiwanese rivals.

Samsung is reportedly investing in LCD manufacturing facilities that uses 10.6 generation glass substrates with production scheduled to begin in the second half of 2017.

But it remains to be seen whether that will make a difference to the bottom line for world’s largest maker of LCD TVs, IBK’s Lee pointed out.

“Those kinds of decisions are inevitable because Samsung is expected to make those investments as a market leader,” he said.

A strategy to ship more pricier premium TVs is also not an alternative. “Even if LG and Samsung focus on the high end, those kinds of markets are not as strong as they first expected.”

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