Business Impact

LG.Philips LCD scraps plan for older generation display plant

SEOUL, South Korea (AP) – South Korea’s LG.Philips LCD Co. said Friday it was scrapping plans to build an older generation liquid crystal display facility and will instead invest in an advanced plant to meet demand for larger-sized flat screen televisions.

”The decision to alter our original plan to invest in a 5.5 generation plant was a strategic one,” Chief Executive Kwon Young-soo said in a statement. ”We will instead review investment in a next generation facility, which will give us a long-term competitive edge in the large-area TV sector.”

The company has yet to decide what generation the new plant will be but said in the statement it expects to complete a detailed plan this year. The new plant will aim for mass-production in 2009, LG.Philips said.

Previously, LG.Philips, the world’s second-largest maker of liquid-crystal displays, said it would invest in the older generation LCD production line instead of an advanced 8th-generation facility optimized for larger-sized TVs.

A 5.5 generation facility is optimized to produce computer monitor screens of up to 22 inches and TV panels of up to 32 inches. An eighth-generation plant is mainly aimed at the 50-inch and above TV market.

South Korean rival Samsung Electronics Co., in partnership with Japan’s Sony Corp., has built an eighth-generation LCD line south of Seoul, seeking an early entry into the 50-inch-plus panel market.

”The LCD industry has been growing rapidly and some LCD manufacturers have continued to expand production capacity through investments in new facilities,” Kwon said. ”At LG.Philips LCD, we believe that right now maximizing the efficiency of our existing facilities and equipment is a better strategy.”

Succeeding generation plants use larger glass substrates to cut LCD panels, thereby boosting output and eventually helping LCD makers cut manufacturing costs.

In April, LG.Philips LCD said it posted a net loss of 169 billion won (US$182lllion; euro136 million) for the first quarter on a decline in panel prices.

The loss was the fourth straight for the company, a joint venture between South Korea’s LG Electronics Inc. and Royal Philips Electronics NV of the Netherlands.

Separately, LG Electronics on Friday launched a reorganization of its digital display business to try and increase profitability.

The reshuffle, which involves dividing the display business into three separate groups, took effect Friday, said company spokeswoman Judy Pae.

LG now has separate divisions for plasma display televisions, liquid crystal display televisions and computer monitors, according to a company press release Thursday.

LG, the world’s second-largest plasma display maker, said May 18 it would close one of its four plasma display panel plants to cut costs.

LG lost 123 billion won (US$132.5 million; euro98.6 million) in the three months ended March 31. It recorded net profit of 150.8 billion won a year earlier.

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