Samsung Spins Off LCD Display Business

Samsung Display Co. will be launched April 1 with capital of $668 million and Samsung in control of all shares of the new business.

Samsung Electronics announced it is spinning off its LCD manufacturing division as part of a restructuring of the company€™s display business to focus on displays with organic light-emitting diode (OLED) technology, which allows panels to be thinner, lighter and brighter. The new company, Samsung Display Co., will be launched April 1 with capital of $668 million and Samsung in control of all shares of the business.

Research from IT analytics firm DisplaySearch finds that Samsung€™s LCD division is the biggest LCD panel maker in terms of revenues, and is a key supplier for all applications, not only for its own products, but also for many other brands, including Apple€™s iPad, Lenovo and HP€™s PCs, and many TV makers. Also according to their research, Samsung€™s TV business sources over half of its LCD TV panels internally (57 percent in 2011, and plans call for 53 percent in 2012).

Samsung also purchases millions of panels internally for its notebooks, monitors and tablet PCs. Samsung€™s TV manufacturing has been increasing its vertical integration, purchasing more LCD cells/open cells, instead of LCD modules. Company analysts noted that if Samsung spins off its LCD business and merges it with SMD, the new company could use resources from LCD€”including revenues, cash flows, fabs and engineering€”to move toward large-size active-matrix organic LED (AMOLED) production.

In a blog posting on DisplaySearch€™s Website, company analysts David Hsieh and Yoonsung Chung note the LCD market has been in oversupply since the second quarter of 2010, and panel makers have suffered losses during that time. At the same time, AMOLED has matured and gained market acceptance. Panel makers are changing their strategies in order to reverse their losses, and with the most substantial resources in AMOLED, the Samsung group is moving fast to make big changes. A spin-off of the LCD division will not be the end, but rather the beginning of another big transition in the display industry.

"[Shifting to OLEDs] is an inevitable trend now. There's no reason for Samsung to pour in more investment into its LCD business, and it would rather focus on raising its OLED technology," HI Investment & Securities analyst Song Myung-sub, said in an interview with The Wall Street Journal. He adds, "With the industry's LCD supply shrinking overall, some Korean players will see a turnaround from the businesses from the third quarter of this year."

In December, Samsung and Sony signed agreements to transition the business relationship with respect to LCD panels. Under the agreement, Samsung acquired all of Sony's shares of S-LCD Corporation, the two companies' LCD panel manufacturing joint venture, making S-LCD a wholly owned subsidiary of Samsung.

Established in April 2004, S-LCD manufactures LCD panels for both its parent companies, contributing to the expansion of the respective parties' TV businesses and the large-sized LCD TV market overall. However, the companies determined that LCD panel and TV market conditions have changed since they forged the deal. To respond to such challenging conditions and to strengthen their respective market competitiveness, the two companies agreed to shift to a new LCD panel business alliance.