February 21, 2012
February 21st, 2012
The WSJ, Bloomberg, LA Times and others are reporting Samsung Electronics Company is spinning off its unprofitable LCD business into a separate corporation provisionally called Samsung Display Co. to be capitalized with $668M investment on or around April 1, 2012. Bloombergreports the board of directors announced the move on Monday, and the new company may end up merging with Samsung Mobile Display, according to Daewoo Securities analyst James Song.
By NPD’s recent reckoning, Samsung is the world’s largest TV maker with 19.3% worldwide market share in 2011, on sales of nearly 48M units. While the company has dominated the top spot for the past six years, they still lost $667M in 2011. But Samsung is not getting out of the display business by any means. The company is shifting focus to new OLED displays with investment plans to spend up to $5.9B, according to Bloomberg, who also quoted Samsung spokesperson Nam Ki Young stating that Samsung, “is reviewing an eventual merge of its LCD and OLED operations.”
The latest numbers today from Santa Clara based NPD help tell the story behind the LCD market. Most folks who follow displays already know that large area LCD panel prices are in the tank right now. Most LCD fabs are experiencing squeezed profits from a condition of oversupply (and overcapacity). This is not new and is so common in fact we even have a name for this process, “the crystal cycle.”
What is unique this time is specifically where growth in large area (9-inch and above) TFT LCDs is happening, and how things look to proceed from this point in the display market development. This is a time in the LCD industry that NPD analyst, David Hsieh is characterizing as “…experiencing unprecedented changes [where the] tablet PC is driving growth and becoming the center of product innovation.”
One look at the display growth numbers tells us tablets are red hot, with a 217% growth from 2010 through 2011. The other high growth category is the public display market at a more modest by comparison 52% growth over the same period. Only one other category, notebook PC is in positive growth territory in 2011, with a slender 8% growth over the period. All others, including LCD TV (at -8%) and LCD monitors (at -1%) are in negative growth territory, see table. In fact, Tablets are the only display category with a rate of change that’s growing in the LCD space, all others lost ground in growth rates over 2010 numbers, including public displays that shed 1 point in 2011 (52% growth) over the growth rate of 53% the year prior.
And the case looks most severe for LCD TVs, which moved from a rate of growth of 35% in 2010 to a negative 5% rate, a whopping 40 points over the period. But does this mean LCD TVs are going away? According to NPD, what we’re seeing are “inventory adjustments in the supply chain” since 2010, even though this is the first time that LCD TVs have been in negative territory since the advent of the category in 2002. The group sees 2012 as a recovery year with developments in thin bezel and LEDs continuing to dominate the TV space.
While tablets, selling almost 60M units in 2011, are driving stellar growth in the category, it is not enough to make up for losses in other segments. Samsung is seeing the writing on the wall and moving (at least operationally) toward a newer higher profit OLED technology that’s poised for $20B growth by 2018, (by Display Search reckoning) and perhaps much sooner if Samsung can deliver on the goods. - Steve Sechrist