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The joint venture between Sony and Samsung to produce flat panel LCD and plasma TVs is in trouble with Samsung SDI reporting record losses. Not far behind is Taiwanese LCD manufacturer AU Optronics who has also reported big losses on the production of flat screen TVs.
Both companies are counting on a cyclical upturn in demand for the rest of the year, but AU’s prospects are brighter as liquid crystal displays (LCDs) are beating out plasma display panels (PDPs) in a cut-throat price war. Once dominant in the 40-inch-and-larger category, plasma displays have been smothered by the onslaught of LCDs whose traditionally higher prices have slowly come down to virtual parity.
AU Optronics said the average selling price of LCDs for television and personal computers dropped sharply in the first quarter but that it expected prices and shipments to rebound in the second quarter thanks to improving demand.
LCD sector leaders Samsung Electronics and LG.Philips LCD Co have posted mixed quarterly results, but Samsung Electronics predicted a tightening of the LCD market through 2008.
AU posted a net loss of US$154 million in the January-March quarter, reversing a T$6.65 billion profit a year ago and a net profit of T$1.659 billion in the previous three months. Taiwan display makers supply more than 40 percent of the world’s output.
PLASMA LOSSES
Meanwhile, the outlook for Samsung SDI, which sells both plasma display screens and traditional cathode-ray tubes (CRT) for TVs, is grim on price drops and weak margins.
Samsung SDI was the world’s top producer of plasma displays in 2005, but has been overtaken by Japan’s Matsushita Electric Industrial who trade as Panasonic, last year on production problems and declining sales.
Samsung SDI posted a net loss of US$83.32 million in the first quarter, worse than a consensus forecast of a 49 billion won loss by seven analysts polled by Reuters. The figure compares with a 52.7 billion won net profit in the first quarter of 2006. Operating margin fell to negative 12.6 percent from a negative 1.7 percent in the fourth quarter. Analysts say plasma makers have no clear strategy but to wait for the industry standard to quickly move to the 50-inch-and-bigger category, where plasma displays have a price advantage.
“For the next two or three years at least, LCDs won’t be able to compete with PDP prices in that category,” said James Kim, an analyst at Lehman Brothers.
Last week, LG Electronics posted a worse-than-expected first quarter net loss as dismal flat screen results wiped out booming mobile phone earnings. Its chief executive said the company would restructure underperforming units in what was understood as a reference to the plasma display business.
