LG Display, one of the main suppliers to iPhone maker Apple, has slashed its investment plans by $2.7 billion to 2020 due to concern over the growth of global smartphone market, Reuters reported.
Research firm IDC says the smartphone market is expected to drop 0.2 percent in 2018 to 1.462 billion units after declining 0.3 percent to 1.465 billion in 2017 and 1.469 billion in 2016.
IDC says that the smartphone market will grow roughly 3 percent annually from 2019 onwards and will touch 1.654 billion in 2022 at a 5-year CAGR of 2.5 percent.
South Korea-based LG Display said it would trim investment by 3 trillion won or $2.7 billion from what was planned by 2020, without revealing its total or previous Capex targets.
LG Display aims to adjust production in South Korea and China in response to trade disputes between Washington and Beijing.
The investment cut would not impact plans to “speed up the shift” from LG’s mainstay liquid crystal display (LCD) business toward next-generation organic light-emitting diode (OLED) panels, the company said.
LG Display said its plans to invest about 20 trillion won in OLED panels by 2020 will not be changed. The display manufacturing company indicates that the substantial reduction in the proposed investment would apply mainly to LCD operations.
LG Display is yet to make a profit from the OLED panel business. LG said OLED panel business would be positive for earnings in the third quarter. LG is focused on investing in OLED technology, with strong positions in large OLED TV screens.
The shift comes as its traditional LCD business, which analysts estimate makes up more than 90 percent of LG’s sales, is struggling with falling prices as fast-growing Chinese panel makers ramp up their capacity.
Prices of 50-inch LCD panels slid 38 percent in May versus the same month last year, according to South Korean government data.
Earlier, Taiwan Semiconductor Manufacturing (TSMC), another Apple supplier, also scaled back its revenue and investment estimates.
“It is a conservative approach resulting from uncertainty around the mobile market,” Don Kim, LG’s chief finance officer, told an earnings conference call, referring to the Capex reduction.
LG Display posted an operating loss of 228 billion won ($202.1 million), hit by declining panel prices. Revenue for the April-June quarter fell 15 percent from a year earlier to 5.6 trillion won.
It was LG Display’s second consecutive quarterly loss amid an uncertain time for the global panel industry, with Chinese manufacturers ramping up capacity and a glut of LCD output crimping prices and profit margins.
A structural oversupply in panels and fierce competition among display makers were expected to continue, LG said in a statement.
China recently approved an LG joint venture to run a new OLED factory there, as the company tries to expand its OLED business towards Chinese TV makers.
