The gist of it: in the short term, the deal between Samsung and LG benefits LG Display, but gives Samsung access to the South Korean supply chain, a significant advantage considering the looming potential for future sanctions in the display industry due to ongoing US-China trade tensions. The question remains, how much either company is willing to bend as frenemies if upcoming quarterly financials don’t pan out for either? The enemy of my enemy is my friend sounds great but it rarely survives longer term pressures.
The Samsung and LG Pact on WOLEDs
Omdia has an analysis discussing a series of negotiations that have been ongoing between Samsung Display and LG Display regarding the supply of White Organic Light-Emitting Diode (WOLED) panels for Samsung ‘s OLED TV lineup. Due to a range of factors including increased prices for LCD panels, a declining cost advantage for their Neo QLED TVs, issues with their LCD supply chain, and the increased demand for OLED TVs, had made Samsung start to look at alternatives.
This lead to the first WOLED deal negotiations in 2021. However, these negotiations did not come to fruition, primarily because LG Display was unwilling to compromise their position in the OLED panel market, which they were the sole supplier of at that time. Fast forward to 2023, the TV market is seeing some similar trends as in 2021, with an unusual upward trend in LCD panel prices, largely due to Chinese panel makers’ efforts to increase profitability. But the OLED TV market is rapidly cooling due to a decrease in premium TV consumption, driven by factors such as inflation and interest rate hikes.
This drop in OLED TV demand has caused an oversupply in LG Display’s OLED production capacity, weakening their bargaining power in negotiations. Consequently, Samsung and LG Display are now more likely to reach a compromise in their negotiations for the WOLED deal.
In terms of who benefits from the deal, in the short term, LG Display stands to gain as the deal will help to increase their reduced OLED panel production and fill their supply capacity, which in turn helps reduce their deficit.
In the long term, Samsung could benefit by strengthening their premium lineup. The deal would allow Samsung to diversify from their LCD supply chain and overcome size limitations, potentially launching a full OLED TV lineup. Additionally, securing the South Korean supply chain could also be beneficial for Samsung considering potential future sanctions in the display industry due to US-China trade tensions.
