Samsung Electronics has finally confirmed reports that it will spin off its liquid crystal display (LCD) manufacturing division.
The move comes as part of a restructuring of the company’s display business to focus on displays with organic light-emitting diodes (OLED) technology, which allows panels to be thinner, lighter and brighter.
The new company, Samsung Display Co., will be launched April 1 with capital of $668 million (£421m), with Samsung in control of all shares of the business.
Research from IT analytics firm DisplaySearch’s finds that Samsung’s LCD division is the biggest LCD panel maker in terms of revenues, and is a key supplier for all applications, not only for its own products, but also to many other brands, including Apple’s iPad, Lenovo and HP’s PCs, and many TV makers. Also according to their research, Samsung’s TV business sources over half of its LCD TV panels internally (57 percent in 2011, and plans call for 53 percent in 2012).
In a blog posting on DisplaySearch’s Website, company analysts David Hsieh and Yoonsung Chung note the LCD market has been in oversupply since the second quarter of 2010, and panel makers have suffered losses during that time. At the same time, AMOLED has matured and gained market acceptance. Panel makers are changing their strategies in order to reverse their losses, and with the most substantial resources in AMOLED, the Samsung group is moving fast to make big changes. A spin-off of the LCD division will not be the end, but rather the beginning of another big transition in the display industry.
“(Shifting to OLED) is an inevitable trend now. There’s no reason for Samsung to pour in more investment into its LCD business, and it would rather focus on raising its OLED technology,” HI Investment & Securities analyst Song Myung-sub, said in an interview with The Wall Street Journal, adding “with the industry’s LCD supply shrinking overall, some Korean players will see a turnaround from the businesses from the third quarter of this year.”
In December, Samsung and Sony signed agreements to transition the business relationship with respect to LCD panels. Under the agreement, Samsung acquired all of Sony’s shares of S-LCD Corporation, the two companies’ LCD panel manufacturing joint venture, making S-LCD a wholly owned subsidiary of Samsung.
Established in April 2004, S-LCD manufactures LCD panels for both its parent companies, contributing to the expansion of the respective parties’ TV businesses, and the large-sized LCD TV market overall.
However, the companies determined that LCD panel and TV market conditions have changed since they forged the deal. In order to respond to such challenging conditions and to strengthen their respective market competitiveness, the two companies agreed to shift to a new LCD panel business alliance.