LG Display Announces Record Operating Loss

LG Display reported unaudited earnings for the three-month period ending December 31, 2022. Revenues in the fourth quarter of 2022 increased by 8% to KRW 7,302 billion ($5.914 billion) from KRW 6,771 in the third quarter of 2022 and decreased by 17% from KRW 8,807 in the fourth quarter of 2021. Operating loss in the fourth quarter of 2022 recorded KRW 876 billion ($711.13 million). This compares with the operating loss of KRW 759 billion in the third quarter of 2022 and with the operating profit of KRW 476 billion in the fourth quarter of 2021.

LG Display saw a decrease in panel shipments in the fourth quarter due to worsening macroeconomic conditions, as set makers’ inventory adjustments further impacted demand in the high-end product sector which had been solid. Panel shipments for mobile devices helped quarter-to-quarter increases in revenues by 8%, accounting for 34% of sales. Panels for TVs accounted for 25% of revenues, while panels for monitors, laptops and tablet PCs accounted for 34%, and automobiles for 7%.

The market-to-order business now accounts for 30% of LG Display revenues, and the company will expand its share in revenue by over 40% in 2023 and 50% in 2024 to mitigate the impact of market conditions. In addition, the company will further strengthen its position in the automotive display sector and continue to lead the mid-sized OLED market including tablet PCs, as the rise in smartphone panel shipments in the second half of 2023 is expected to add positive fuel to its efforts to enhance its market-to-order business.

After the company’s decision to end its LCD TV panel production in Korea, LG Display’s large-sized OLED business was evaluated by an external institution and divided into a separate cash-generating unit in accordance with related accounting standards and objective procedures. For its large-sized OLED business, LG Display says it needs to work on being more competitive and managing costs better, while concentrating continuously on qualitative growth. It also hopes to improve its financial position by expanding into high growth opportunities such as transparent and gaming OLED panels.

What We Think

This is the third straight quarter of losses for LG. Even so, the extent of the losses comes as a surprise to analysts following the company. And this release is like a cold shower for any enthusiasm about the short term. In the meantime, it is tightening belts, and pushing higher margin products. Sounds like an austerity budget.