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Fear and Trembling: LG Display faces the axe for OLED burn-in and market squeeze
After seven years of ignoring the warning signs, LG Display's OLED TV panel business is facing a reckoning by LG Group's leadership and the market as rival Samsung jumps to MicroLED and QD-OLED panels.
By Cho Mu-Hyun | May 15, 2019 -- 11:00 GMT (04:00 PDT)| Topic: Innovation
2
LG Display has made some big promises for this year. It plans to move 4 million OLED TV panels in 2019, after shipping 2.9 million panels last year. But behind the big boasting, there is now fear. The company is the world's largest Liquid Crystal Display (LCD) maker, which is still its mainstay, but LCD prices have dropped to a point where it is hitting the firm hard.
Then there are the disastrous profits; its annual operating profit in 2018 fell 96.2% from the previous year. It went into the red for the first quarter of this year. And while its OLED TV business made a profit for the first time this year, it was only a meagre one. Sales of the OLED TV have also opened slower than expected, and the general feeling within the company is that it has pushed itself into a corner.
Meanwhile, archrival Samsung Electronics has taken advantage of the LCD price drop. Its quantum dot (QD) layered LCD TVs, dubbed QLED by the firm, have performed better than market expectations. This was followed by Samsung in 2018 introducing its MicroLED TV offerings, which are comparable to OLED in terms of black levels. As a nail in the coffin, Samsung Display then confirmed earlier this year that it was developing quantum-dot organic light emitting diode (QD-OLED) panels. When the news of QD-OLED first came out, there was disbelief within LG and then panic, according to LG insiders.
LG's OLED TV has been a near-decade in the making and has already been in the market for seven years. Going forward, LG's biggest short-term fear is that its rival Samsung will effectively take over the LCD market from the product-end with QLED. In the long-term, LG faces humiliation if Samsung successfully launches its QD-OLED on the OLED ecosystem that LG effectively built on its own. As the old saying goes, one man sows and another man reaps.
LG Display gambled hard when it pushed for OLED aimed at TVs seven years ago. It initially gained ground from rival Samsung but the future is not looking as rosy as it did before as its bigger rival's dual push of QLED and MicroLED TVs is finding success and possible QD-OLED roll out in the future looms.
LG Display and LG Electronics have taken huge bets on large-sized OLED panels since 2012. They needed an edge to surpass rival Samsung Electronics, which has topped TV sales since they beat Sony in 2007. LG, shamefully, has been labelled as the perpetual number two. So when Samsung pulled out of using OLED in 2014, moving to using QD-LCD panels instead for its flagship TVs, LG was eager to win applause for holding its ground and having aspirations to make the technological breakthroughs its biggest rival had failed to do.
Samsung's logic at the time of pulling out of OLED TV panels was one influenced by technology and profits. The leadership had ultimately concluded the "blue pixel problem" -- OLED pixels have a shorter light span than others that cause the infamous permanent image retention, or "burn-in" -- couldn't be solved in the short-term. Samsung believed OLED was deemed more suitable for smartphones, which have smaller screens, shorter product life-cycles, and consume less power, as it did not face the same issues faced by TVs. Additionally, the LCD industry, which Samsung and LG built together by surpassing Japanese and Taiwanese rivals over the span of 20 years, was still profitable. The decision was fiercely debated, even among the top brass, before it was ultimately made.
Identify and Track What’s Breaking the Internet
LG, meanwhile, took a different route. While it couldn't solve the blue pixel problem, the company introduced white OLEDs. By using a grid comprised of white OLEDs, LG could overlay a series of colour filters to produce four subpixels: red, green, blue and white. The aim behind using white OLEDs was to protect blue pixels from aging. Samsung lampooned its rival, saying a panel with white pixels was not "true OLED" as it broke the sacred triumvirate of RGB: red, green, and blue. But the move by LG Display had the full backing of the leadership of LG Corp at the time, the holding company of the business group.
LG was falling drastically behind in the smartphone race. It needed a win. The decision to hang onto OLED was due to pride just as much as it was for taking the long-view. For LG, OLED in TVs was deemed the future.
LG Electronics' OLED TVs from 2015 onward would receive rave reviews, and deservedly so. LG Display was making record profits -- though not because of its OLED TVs, but because of the still robust LCD market. OLED was in fact a detriment to profits until early this year, with the South Korean display giant having invested billions into improving the yield rate of large-sized OLED panels.
LG Display's 88-inch 8K OLED was first showcased last year at CES 2018 but is expected to be commercialized later this year. LG's OLED may have the deepest blacks but there are still technological issues that linger seven years on.
Meanwhile, LG Electronics last month announced it would no longer produce smartphones in South Korea and make them in Vietnam, a move designed to cut costs.
LG Display, however, faces a serious problem. Over the past three years, its rival Samsung has not only broken even in revenue and profits, but has shown signs of getting ahead. What is more concerning however, is that unlike its sister subsidiaries, it seems the company has no "Plan B" for its display business. The company is facing a chilling deadline from the group's leadership and market.
Samsung's QLED offerings were slow at first but have now turned into a profit darling thanks to advancements in technology and LCD price drops. The South Korean tech giant is widening the application of QD technology such as its Lifestyle models for 2019 shown here.
Signs of a reversal of fortune back towards Samsung first came in 2016, when Apple signed a mega-deal to order 100 million OLED panels from Samsung for its smartphones. The deal was a symbolic win for Samsung over LG because it showed the former's bet that the smartphone market would open up first for OLED panels before TVs was correct. Today, Samsung, Apple, and Huawei all use OLED panels for their flagships.
In TVs, Samsung was losing the battles but its appears the company is now winning the war. Ultimately, Samsung's QD-LCD, which was renamed from SUHD to QLED in 2017, proved to be another sound business decision by Samsung over LG as the years have gone by. Since 2017, LCD panel prices have taken a nose dive, thanks to the drastically increased production capacity and quality of Chinese rivals, spearheaded by BOE. Due to the lowered prices, Samsung, which retained its traditional manufacturing facilities for LCDs with little increase in overhead, has been buying LCDs cheaply and selling them at a premium with the addition of quantum dots. LG, meanwhile, has taken a beating from the LCD price drop without gaining any meaningful defence from its OLED TVs due to the latter market not yet hitting scale.
Samsung also made a fateful decision in 2017. BOE was investing in a 10.5th generation LCD line that began production in 2018. Around the same time, Samsung Chairman and then-CEO, Kwon Oh-hyun, rejected Samsung Display's proposal to expand its 8th generation line as there was no guarantee of a return in investment with the drop in LCD prices, according to sources. For displays, the generation reflects the size of the glass substrate: the higher the generation number, the larger the substrate is. Large substrates drastically reduce production costs, especially for large-sized panels, as more panels can be cut out of it with fewer leftovers. Kwon's rejection was as much of a nod to BOE's lead as well as a rejection to only sticking to industry standards for LCDs. Samsung Electronics would make profits from the LCD downturn by selling them at a premium price with a QD layer while Samsung Display would be tasked with finding forward-looking solutions, which resulted in QD-OLEDs.
LCDs are essentially commodities, not unlike memory semiconductors, so its value will follow an up-cycle and down-cycle pattern, with another up-cycle expected to arrive after an adjustment of the players. But profitability mirroring its golden days, when it bashed out Plasma Display Panels and CRT after the turn of the century is not likely to return. IHS estimates that LCD panel prices will have a global average cost of $508 for the first quarter of 2019. That figure is expected to decline, with the average global price of LCDs for the fourth quarter of 2023 expected to be around $393.
In technology, Samsung also took advantage of LCD's strength: brightness. One of the traditional strengths of OLED over LCD is the aperture ratio, or how much light can actually come of a display area. Because OLED can emit light on its own, it is easier to secure brightness compared to LCDs. But the downside is, to take advantage of the higher aperture ratio and increase the brightness you need more electricity, and the increased power consumption leads to the diode's life span shortening -- another cause of "burn-in". This is exasperated when you want to increase the picture quality, from Full HD to UHD, to 8K, and so on as it requires more and more power. So Samsung amped up the brightness to its maximum capacity for its QLED TVs, with LCD TVs being able to handle the required power surge without any problems. This is also the reason why Samsung was able to launch 8K resolution TVs earlier than LG. Samsung's 8K TV are already commercialised, while LG is planning to launch its 88-inch 8K OLED in the second half of this year.
These moves by LG and Samsung reflect the market share changes of the past three years. Up until 2017, LG seemed to be closing the gap against its chief rival Samsung in the TV market. In 2016, Samsung controlled 28% of market share in terms of revenue, while LG and Sony had 13.6% and 8.5%, respectively, according to IHS Markit. In 2017, when Samsung introduced the QLED brand, it took a beating and its market share dropped to 26.5%, while LG and Sony clinched 14.6% and 10.2%. But in 2018, Samsung made a huge comeback with 29%, while LG clinched 16.4%, and Sony 10.1%.
Read more: Is OLED slowly burning down?
What at first seems odd is that in terms of quantity, Samsung's market share dropped from 21.6% in 2016, to 20% in 2017, and then to 18.7% in 2018. LG, meanwhile, flat-lined at 12.2% in 2016, 12.6% in 2017, and 12.2% in 2018. Essentially, this means that both conglomerates have been losing, or rather intentionally giving up, customers who are purchasing LCD TVs in the low-end. But in turn, both companies are making lots of revenue from their premium QLED and OLED line-ups. QLED and OLED may be based on different technologies, but both are clinching high-end consumers, putting the "which is better debate" to rest, at least in terms of profits and consumer interest. Samsung's profitability in the super high-end market has also been higher than its rivals.
Samsung and LG are keen students of history. Though their choices have been drastically different, the business choices from both companies over the past three years have been largely focused on safeguarding against emerging Chinese companies, which is strikingly similar to the way they defeated Japanese titans of old. But unlike Sony, which held onto its CRT legacy a little too longer than it should have, Samsung and LG have reviewed their own histories and are making bold bets to graduate from LCD. Well, at least Samsung has, it seems, but LG faces many tough decisions going forward.
Samsung has succeeded in launching a smaller MicroLED display __ this one is 75-inches in size and uses smaller micrometer LEDs as pixel than it predecessors.
In an uncertain future, hedge your bets. Samsung is definitely doing just that, with the triple push of QLED, MicroLED, and QD-OLED technologies. Not only that, the South Korean tech giant is also making this a horse race between its own businesses: Samsung's Visual Display (VD) business, a part of Samsung Electronics, is pushing QLED and MicroLED, while Samsung Display is investing in QD-OLED. This is a Samsung "tradition" that dates back decades. In the 2000s, when it was unclear whether LCD or PDP would rule the next decade of TV displays, the conglomerate did both. Samsung Electronics headed LCD and Samsung SDI, the group's component making arm, focused on PDP and later manufactured and sold the TV themselves.
MENU
Fear and Trembling: LG Display faces the axe for OLED burn-in and market squeeze
After seven years of ignoring the warning signs, LG Display's OLED TV panel business is facing a reckoning by LG Group's leadership and the market as rival Samsung jumps to MicroLED and QD-OLED panels.
By Cho Mu-Hyun | May 15, 2019 -- 11:00 GMT (04:00 PDT)| Topic: Innovation
2
LG Display has made some big promises for this year. It plans to move 4 million OLED TV panels in 2019, after shipping 2.9 million panels last year. But behind the big boasting, there is now fear. The company is the world's largest Liquid Crystal Display (LCD) maker, which is still its mainstay, but LCD prices have dropped to a point where it is hitting the firm hard.
Then there are the disastrous profits; its annual operating profit in 2018 fell 96.2% from the previous year. It went into the red for the first quarter of this year. And while its OLED TV business made a profit for the first time this year, it was only a meagre one. Sales of the OLED TV have also opened slower than expected, and the general feeling within the company is that it has pushed itself into a corner.
Meanwhile, archrival Samsung Electronics has taken advantage of the LCD price drop. Its quantum dot (QD) layered LCD TVs, dubbed QLED by the firm, have performed better than market expectations. This was followed by Samsung in 2018 introducing its MicroLED TV offerings, which are comparable to OLED in terms of black levels. As a nail in the coffin, Samsung Display then confirmed earlier this year that it was developing quantum-dot organic light emitting diode (QD-OLED) panels. When the news of QD-OLED first came out, there was disbelief within LG and then panic, according to LG insiders.
LG's OLED TV has been a near-decade in the making and has already been in the market for seven years. Going forward, LG's biggest short-term fear is that its rival Samsung will effectively take over the LCD market from the product-end with QLED. In the long-term, LG faces humiliation if Samsung successfully launches its QD-OLED on the OLED ecosystem that LG effectively built on its own. As the old saying goes, one man sows and another man reaps.
LG Display gambled hard when it pushed for OLED aimed at TVs seven years ago. It initially gained ground from rival Samsung but the future is not looking as rosy as it did before as its bigger rival's dual push of QLED and MicroLED TVs is finding success and possible QD-OLED roll out in the future looms.
LG Display and LG Electronics have taken huge bets on large-sized OLED panels since 2012. They needed an edge to surpass rival Samsung Electronics, which has topped TV sales since they beat Sony in 2007. LG, shamefully, has been labelled as the perpetual number two. So when Samsung pulled out of using OLED in 2014, moving to using QD-LCD panels instead for its flagship TVs, LG was eager to win applause for holding its ground and having aspirations to make the technological breakthroughs its biggest rival had failed to do.
Samsung's logic at the time of pulling out of OLED TV panels was one influenced by technology and profits. The leadership had ultimately concluded the "blue pixel problem" -- OLED pixels have a shorter light span than others that cause the infamous permanent image retention, or "burn-in" -- couldn't be solved in the short-term. Samsung believed OLED was deemed more suitable for smartphones, which have smaller screens, shorter product life-cycles, and consume less power, as it did not face the same issues faced by TVs. Additionally, the LCD industry, which Samsung and LG built together by surpassing Japanese and Taiwanese rivals over the span of 20 years, was still profitable. The decision was fiercely debated, even among the top brass, before it was ultimately made.
Identify and Track What’s Breaking the Internet
LG, meanwhile, took a different route. While it couldn't solve the blue pixel problem, the company introduced white OLEDs. By using a grid comprised of white OLEDs, LG could overlay a series of colour filters to produce four subpixels: red, green, blue and white. The aim behind using white OLEDs was to protect blue pixels from aging. Samsung lampooned its rival, saying a panel with white pixels was not "true OLED" as it broke the sacred triumvirate of RGB: red, green, and blue. But the move by LG Display had the full backing of the leadership of LG Corp at the time, the holding company of the business group.
LG was falling drastically behind in the smartphone race. It needed a win. The decision to hang onto OLED was due to pride just as much as it was for taking the long-view. For LG, OLED in TVs was deemed the future.
LG Electronics' OLED TVs from 2015 onward would receive rave reviews, and deservedly so. LG Display was making record profits -- though not because of its OLED TVs, but because of the still robust LCD market. OLED was in fact a detriment to profits until early this year, with the South Korean display giant having invested billions into improving the yield rate of large-sized OLED panels.
LG Display's 88-inch 8K OLED was first showcased last year at CES 2018 but is expected to be commercialized later this year. LG's OLED may have the deepest blacks but there are still technological issues that linger seven years on.
Meanwhile, LG Electronics last month announced it would no longer produce smartphones in South Korea and make them in Vietnam, a move designed to cut costs.
LG Display, however, faces a serious problem. Over the past three years, its rival Samsung has not only broken even in revenue and profits, but has shown signs of getting ahead. What is more concerning however, is that unlike its sister subsidiaries, it seems the company has no "Plan B" for its display business. The company is facing a chilling deadline from the group's leadership and market.
Samsung's QLED offerings were slow at first but have now turned into a profit darling thanks to advancements in technology and LCD price drops. The South Korean tech giant is widening the application of QD technology such as its Lifestyle models for 2019 shown here.
Signs of a reversal of fortune back towards Samsung first came in 2016, when Apple signed a mega-deal to order 100 million OLED panels from Samsung for its smartphones. The deal was a symbolic win for Samsung over LG because it showed the former's bet that the smartphone market would open up first for OLED panels before TVs was correct. Today, Samsung, Apple, and Huawei all use OLED panels for their flagships.
In TVs, Samsung was losing the battles but its appears the company is now winning the war. Ultimately, Samsung's QD-LCD, which was renamed from SUHD to QLED in 2017, proved to be another sound business decision by Samsung over LG as the years have gone by. Since 2017, LCD panel prices have taken a nose dive, thanks to the drastically increased production capacity and quality of Chinese rivals, spearheaded by BOE. Due to the lowered prices, Samsung, which retained its traditional manufacturing facilities for LCDs with little increase in overhead, has been buying LCDs cheaply and selling them at a premium with the addition of quantum dots. LG, meanwhile, has taken a beating from the LCD price drop without gaining any meaningful defence from its OLED TVs due to the latter market not yet hitting scale.
Samsung also made a fateful decision in 2017. BOE was investing in a 10.5th generation LCD line that began production in 2018. Around the same time, Samsung Chairman and then-CEO, Kwon Oh-hyun, rejected Samsung Display's proposal to expand its 8th generation line as there was no guarantee of a return in investment with the drop in LCD prices, according to sources. For displays, the generation reflects the size of the glass substrate: the higher the generation number, the larger the substrate is. Large substrates drastically reduce production costs, especially for large-sized panels, as more panels can be cut out of it with fewer leftovers. Kwon's rejection was as much of a nod to BOE's lead as well as a rejection to only sticking to industry standards for LCDs. Samsung Electronics would make profits from the LCD downturn by selling them at a premium price with a QD layer while Samsung Display would be tasked with finding forward-looking solutions, which resulted in QD-OLEDs.
LCDs are essentially commodities, not unlike memory semiconductors, so its value will follow an up-cycle and down-cycle pattern, with another up-cycle expected to arrive after an adjustment of the players. But profitability mirroring its golden days, when it bashed out Plasma Display Panels and CRT after the turn of the century is not likely to return. IHS estimates that LCD panel prices will have a global average cost of $508 for the first quarter of 2019. That figure is expected to decline, with the average global price of LCDs for the fourth quarter of 2023 expected to be around $393.
In technology, Samsung also took advantage of LCD's strength: brightness. One of the traditional strengths of OLED over LCD is the aperture ratio, or how much light can actually come of a display area. Because OLED can emit light on its own, it is easier to secure brightness compared to LCDs. But the downside is, to take advantage of the higher aperture ratio and increase the brightness you need more electricity, and the increased power consumption leads to the diode's life span shortening -- another cause of "burn-in". This is exasperated when you want to increase the picture quality, from Full HD to UHD, to 8K, and so on as it requires more and more power. So Samsung amped up the brightness to its maximum capacity for its QLED TVs, with LCD TVs being able to handle the required power surge without any problems. This is also the reason why Samsung was able to launch 8K resolution TVs earlier than LG. Samsung's 8K TV are already commercialised, while LG is planning to launch its 88-inch 8K OLED in the second half of this year.
These moves by LG and Samsung reflect the market share changes of the past three years. Up until 2017, LG seemed to be closing the gap against its chief rival Samsung in the TV market. In 2016, Samsung controlled 28% of market share in terms of revenue, while LG and Sony had 13.6% and 8.5%, respectively, according to IHS Markit. In 2017, when Samsung introduced the QLED brand, it took a beating and its market share dropped to 26.5%, while LG and Sony clinched 14.6% and 10.2%. But in 2018, Samsung made a huge comeback with 29%, while LG clinched 16.4%, and Sony 10.1%.
Read more: Is OLED slowly burning down?
What at first seems odd is that in terms of quantity, Samsung's market share dropped from 21.6% in 2016, to 20% in 2017, and then to 18.7% in 2018. LG, meanwhile, flat-lined at 12.2% in 2016, 12.6% in 2017, and 12.2% in 2018. Essentially, this means that both conglomerates have been losing, or rather intentionally giving up, customers who are purchasing LCD TVs in the low-end. But in turn, both companies are making lots of revenue from their premium QLED and OLED line-ups. QLED and OLED may be based on different technologies, but both are clinching high-end consumers, putting the "which is better debate" to rest, at least in terms of profits and consumer interest. Samsung's profitability in the super high-end market has also been higher than its rivals.
Samsung and LG are keen students of history. Though their choices have been drastically different, the business choices from both companies over the past three years have been largely focused on safeguarding against emerging Chinese companies, which is strikingly similar to the way they defeated Japanese titans of old. But unlike Sony, which held onto its CRT legacy a little too longer than it should have, Samsung and LG have reviewed their own histories and are making bold bets to graduate from LCD. Well, at least Samsung has, it seems, but LG faces many tough decisions going forward.
Samsung has succeeded in launching a smaller MicroLED display __ this one is 75-inches in size and uses smaller micrometer LEDs as pixel than it predecessors.
In an uncertain future, hedge your bets. Samsung is definitely doing just that, with the triple push of QLED, MicroLED, and QD-OLED technologies. Not only that, the South Korean tech giant is also making this a horse race between its own businesses: Samsung's Visual Display (VD) business, a part of Samsung Electronics, is pushing QLED and MicroLED, while Samsung Display is investing in QD-OLED. This is a Samsung "tradition" that dates back decades. In the 2000s, when it was unclear whether LCD or PDP would rule the next decade of TV displays, the conglomerate did both. Samsung Electronics headed LCD and Samsung SDI, the group's component making arm, focused on PDP and later manufactured and sold the TV themselves.
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