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LG cuts spending as tablet boom hits LCD TVs

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LG cuts spending as tablet boom hits LCD TVs
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Booming sales of mobile devices, such as tablet computers and smartphones, are hitting makers of liquid crystal display flat-screens for TVs and computers.

One of the biggest makers, LG Display, has said that falling demand for panels means it will slash its capital spending by a quarter next year.

Those panels are its main source of earnings. The same problem is also hitting Sony, Samsung and Sharp and Philips is getting rid of its loss-making TV business.

LG Display and Samsung Electronics together account for half of the global flat screen market.

The reduction by LG Display, the first major technology company to announce a sharply reduced spending plan for 2012, will take the company’s capital expenditure to the lowest in four years.

LCD makers will keep 2012 investment plan conservative and LG is also likely to cut spending again as visibility is very low due to weak demand especially from Europe and the United States,” said John Soh, an analyst at Shinhan Investment & Securities.

“LG is likely to report losses widening in the current quarter and the outlook for the next nine months or so is dreadful due to weak PC and TV demand.”

Weak demand for PCs and TVs are a big concern for LCD panel makers as the two products account for nearly 90 percent of large-sized flat-screen panels.

This month, a media report said LG Electronics, the world’s No.2 TV maker, had cut its TV sales target this year by 20 percent, joining Sony in bracing for weaker sales due to uncertain global economic prospects.

“This is healthy for the industry. Demand for LCD panels is still there even though it may be weak in the coming few quarters,” said KGI Securities analyst Eric Kao. “But once it recovers and the supply has not increased because panel makers did not expend production, the industry can return to a healthy state.”