LG.Philips LCD revived plans for eighth-generation (8G) LCD production amid booming demand for TVs of 40-inches and larger, company bosses told analysts in a conference call on 11 July 2007. In 2006, …
LG.Philips LCD revived plans for eighth-generation (8G) LCD production amid booming demand for TVs of 40-inches and larger, company bosses told analysts in a conference call on 11 July 2007. In 2006, LG.Philips put forward plans for an 8G facility in Paju, South Korea, as it struggled with a sharp fall in prices and a glut of LCD panels. It expects to start 8G production in the 1H of 2009. LG.Philips in 2007 cut capital spending to USD 1 billion from USD 3.1 billion in 2006. It began building the 8G plant in December 2005 and completed the shell of the building. It looked at adding 5.5G and 7.5G equipment to the facility, finally choosing 8G, best suited for producing 52-inch panels, CFO Ron Wirahadirsaka said. The company still has not finalized capital spending for the 8G plant or chosen the glass substrate size it will use, he said. But LG.Philips will incur costs in 2008 exceeding the USD 1 billion it is spending in 2007 capital projects, Mr. Wirahadirsaka said. The turnaround from ordering equipment to starting production is six to nine months, he said. The company may standardize on the 2.2×2.5-meter 8G substrate being used by the Samsung- Sony S-LCD joint venture that began production this month, company officials said. “We“ll look at what is the best way”, Mr. Wirahadirsaka said. “We are certainly going to look at standardizing it”. Unlike February 2006, when LG.Philips was among the first to move to 7G production, it will be a “follower” in 8G. Sharp was the first to start 8G production, in October 2006. “We will be in a following mode so the 8G equipment has been tested already”, Mr. Wirahadirsaka said. LG.Philips chose 8G over 7.5G because 75.G is not “optimized” for producing 52- inch panels, he said. Besides cutting capital spending in 2007, LG.Philips is trying to lower component costs. It has had “good experience” in achieving lower glass costs at its joint venture with Nippon Electric Glass, but met “some resistence” from other suppliers to discounts, he said. Mr. Wirahadirsaka did not identify the other glass suppliers, but LG.Philips also buys substrates from the Samsung-Corning Precision Glass in Korea. As part of the 8G investment, LG.Philips may add internal capacity for some components, Wirahadirsaka said. Meanwhile, LG.Philips turned around to a USD 247 million 2Q profit from a USD 350.2 million loss a year ago amid strong demand for LCD TV and PC monitor panels. Revenue rose to USD 3.65 billion from USD 3.1 billion a year ago. Analysts had been expecting USD 3.5 billion in sales. Gross margins improved to 9% from a negative 9% in 2006. LG.Philips glass shipments reached 2.8 million square meters, up 26% from 2.24 million in the 1Q and 1.48 million a year ago. TVs accounted for 47% of 2Q shipments, down from 48% a year ago; monitors increased to 27% from 26 %. Notebook panels were 21% of shipments, flat with a year ago. Average selling price per square meter fell to USD 1,274 from USD 1,287 in the 1Q and USD 1,598 a year ago. The average price for TV panels declined 2% from the 1Q. As a result of increased demand, 7G monthly production averaged 99,000 glass sheets, up from forecasts for 90,000. That will rise to 110,000 units the 3Q and 130,000 by year-end, Mr. Wirahadirsaka said. About 60% of the 7G plant“s capacity went for 19-inch widescreen PC monitor panels, the remainder to TVs, Mr. Wirahadirsaka said. Within the TV segment, 42-inch panels accounted for about half of production, followed by 47-inch (15%), he said. TV and PC monitor panel inventory stood at three weeks and less than two weeks at the end of the quarter. Industry-wide, finished inventory stood at about two months at quarter“s end, “normal for this time of year”, Mr. Wirahadirsaka said.