LG Display Co Ltd, a major supplier of iPad and iPhone screens, said its LCD panel shipments would slide this quarter, underscoring worries about weaker growth for Apple Inc products, and taking the shine off forecast-trouncing results.
Fears that demand for the iPhone and the iPad could be slowing have been triggered by news of possible production cutbacks by some component suppliers in Asia and were exacerbated after Apple reported weaker-than-expected iPhone sales in its quarterly earnings.
The South Korean company said some clients were cutting orders and it expect LCD panel shipments to decline by around 15 percent in the first quarter from the previous quarter.
It provides about 70 percent of iPad screens, according to research firm DisplaySearch.
“Some customers are adjusting their inventory and that will affect our panel shipments,” Chief Financial Officer James Jeong told an analyst briefing.
“Along with overall weakness in demand due to a seasonal slowdown, we expect our panel shipments will decline by more than 10 percent and reduce first-quarter earnings.”
Sales of tablet and smartphone panels, which are largely bought by Apple, accounted for 31 percent of LG Display’s total screen shipments in the fourth quarter. Jeong said that will fall to around 25 percent in the first quarter but added that it will rise back to about 30 percent for the whole year.
A source close to LG Display also played down the risk of a very sharp decline.
“Market concerns that (Apple) orders will tumble dramatically are somewhat overdone,” said the source, referring to a CLSA forecast this week that LG’s iPad panel shipments could fall six-fold to 2 million in the current quarter. He declined to be identified as he is not allowed talk about Apple.
“As Apple results showed today, iPad demand is much stronger than many had worried about and that’ll be reflected in suppliers’ first-quarter results.”
Hit by growing worries about demand for Apple products, LG Display’s shares have lost about 17 percent since December after gaining 40 percent in the first 11 months of 2012. Prior to the results, they closed down 1.2 percent, underperforming a 0.8 percent decline in the broader market.
A first-quarter fall in profits will come, however, after a very strong fourth quarter that saw LG Display book 587 billion won ($550 million) in operating profit, one-third higher than the market consensus and up from an operating loss of 155 billion won for the same period a year earlier.
Helped by a rebound in TV sales as well as solid iPhone sales, the results also mark its highest quarterly profit since the second quarter of 2010 and a continuation of a turnaround that began in July-September after seven straight quarters of losses, mainly due to an industry oversupply of TV panels.
Sales for LG Display, which vies with Samsung Electronics Co Ltd’s (005930.KS) panel unit for the top position in liquid crystal display flat screens globally, jumped to 8.7 trillion won in the quarter, a quarterly record. That was up 32 percent from a year earlier and 15 percent higher from the previous quarter.
Apple sold some 20 million more iPhones in the December quarter from the previous quarter, as it expanded iPhone 5 sales. The introduction of the iPad mini also boosted LG Display’s panel shipments.
The iPhone sales, however, fell short of expectations, fanning fears that its dominance of the mobile industry is slipping.
In forecasts made prior to Apple and LG Display’s results, analysts said they expected LG Display’s first-quarter operating profit to tumble to around 123 billion won.
Two industry sources told Reuters last week that rival Sharp Corp (6753.T) of Japan has nearly halted production of 9.7-inch screens for iPad, possibly as demand shifts to the iPad mini.
Sharp supplied around 17 percent of Apple’s iPad screens in the fourth quarter, while Samsung provided 12 percent, according to DisplaySearch.
Apple’s Chief Financial Officer Peter Oppenheimer said iPad sales are expected to fall in the first quarter, as they normally do after the year-end holiday season.
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May 3, 2016