LG Electronics is planning to get out of PDP-TV production this year and sell its plasma-related equipment and technologies to China’s Sichuan Changhong Electric Co, Siu Han and Steve Shen reported today in Digitimes, citing industry sources. But the parties have not yet reached an agreement, with the sources saying that Changhong, a large and successful Chinese appliance company, is currently suffering from capital constraints.

Ken Werner
Senior Analyst and Editor

LG has been losing money on its plasma operations, and has been trying to consolidate its business around a profitable core. One strategy was to focus on 42-inch PDP-TVs, and to manufacture 42-inch panels very efficiently. But the rapid decline in the prices of LCD panels and LCD-TVs have sharply reduced the appeal of this once attractive niche. Vizio, a major customer for LG’s plasma panels, stopped selling plasma TVs at the turn of the year. Vizio was not doing badly with plasma, but found that in the big-box environment where its products are sold, LCD-TVs were turning over faster than PDP-TVs.

Late in February, according to several reports, LG vice president Lee Gyu-Hong told an interviewer that a prolonged recession would make plasma manufacturing unprofitable for the company, and he expected LG to make its official decision to leave the market before the end of the year.

The global plasma TV market remains healthy. Sales in 2007 were about 12M units. That grew to about 14.2M in 2008 and is projected to reach roughly 15M in 2009, of which LGE has been projected to ship 3M, according to industry sources. But that represents a slowing of the growth rate, from 19.7% in 2008 to 6.7% in 2009, according to sales figures and projections from iSuppli. The growth rate is expected to increase in 2010.

Changhong has started selling its own 42- and 50-inch PDP-TVs in China market, and is developing second-generation PDP modules.

In mid-April, Changhong announced it had applied for a long-term loan of US $150M from the China Development Bank (CDB) for its subsidiary Sichuan CCO Display Technology Co Ltd. If approved, the 10-year loan would be used to finance technical development and purchases of production equipment for the second phase of CCO’s PDP project, reported China Knowledge. The second phase of building COC’s PDP production lines is also receiving support from the local government of Mianyang, Sichuan Province, reported Business Week in late March.

The bottom line may be that even with reasonable growth in the plasma panel and plasma TV businesses, there simply isn’t enough volume to support more than two major international players - Panasonic and Samsung SDI - particularly if Changhong is peeling off a significant portion of the mainland China market.