Integration Vertical integration is what LG Display wants to achieve. Why? Cost savings and more control over how LCDs get made, especially small/medium LCDs. Another reason is to be competitive against Samsung, one of the most vertically integrated LCD manufacturers in the world.
Win Win LG Display is planning to absorb the LCD module operations of LG Innotek. The LCD module business accounts for roughly 20% of LG Innotek’s total revenues, which was KRW 3 trillion in 2008. LG Innotek in return will receive a cash infusion that will allow it to concentrate on its LED business. LG Innotek is planning to invest about KRW 350 billion in 2010 to expand it LED capacity in Gwangju and about KRW 1 trillion to build a LED manufacturing facility in Paju where LG Display’s LCD cluster is located. LG Innotek is expected to earn KRW 1.5 trillion in LED sales in 2012. The company will seek to vertical integrate its LED businesses: LED backlighting, wafer, chip, packaging, and module operations. The absorption of LG Innotek’s module business is subject to the board’s approval.
Competitive By bringing small/medium LCD module capabilities into LG Display, the company will be able to save manufacturing costs and be more competitive with its rival Samsung Mobile Display (SMD). LG Display generates roughly KRW 1 trillion annually for small/medium LCD panels–about half of what SMD makes. In 2008, LG Display generated KRW 700 billion.
Source: “LG Plans Display Shakeup” – The Korea Times