South Korea's Samsung Electronics Co. the world's biggest maker of televisions, is shifting its focus towards new generation OLED display technology, and said it will spin off its loss-making LCD flat-screen business into an affiliate.
The outlook for liquid crystal display TVs has dimmed as shoppers in developed markets have traded in their bulky cathode-ray tube TVs for flat screens, and competition has intensified from low-cost Chinese manufacturers.
Annual global sales of LCD TVs will contract by 8 percent to $92 billion by 2015, flat panel industry research company DisplaySearch has forecast, while the OLED display market could top $20 billion by 2018, accounting for 16 percent of the total display industry, up from a current 4 percent.
Japans' Sony Corp agreed to exit its LCD joint venture with Samsung in December, while Sharp Corp said it would halve LCD output for January-March at a plant in western Japan.
Taking the OLED route
Together, Panasonic, Sony and Sharp expect to lose $17 billion this year, highlighting the savaging of Japan's electronics industry, and TV makers in particular, by foreign rivals such as Samsung, weak demand and a strong yen.
Samsung's LCD division made an operating loss of 750 billion won last year. With TVs becoming smart – linked to other devices like tablets and smartphones – an inability to win in the TV market risks hobbling sales across the Japanese groups' wider consumer electronics line-ups. Provisionally named Samsung Display Co Ltd, the spun-off LCD unit will officially be launched as a new business on April 1, with 750 billion won in capital, Samsung said.
Samsung and others such as rival LG Display Co are shifting to newer organic light-emitting diode (OLED) flat-screen display currently used mainly in high-end smartphones, reckoning this technology will replace LCD in larger-sized panels such as TV screens. Samsung Electronics said earlier this month it was considering fully taking over Samsung Mobile Display (SMD), its OLED joint venture with its Samsung SDI subsidiary. SMD is a near monopolistic supplier of OLED displays, which are thinner, more power-efficient and boast better clarity and colour contrast than LCD screens.
There has been speculation Samsung could drop a full acquisition of SMD, which may cost 1.6-2.0 trillion won, and instead transfer its LCD business to the OLED maker and receive a significant number of new SMD shares. In a statement on Monday, the company said it aimed to be more competitive in a rapidly changing market with the new technology and a more streamlined decision-making process.
Shares in Samsung Electronics last traded down 0.1 percent at 1.174 million won, after earlier touching an intra-day life high of 1.194 million won.