LG Display Q3’11 Data Analysis

Revenues:

Revenues and shipments increased as profits plummeted in the third quarter. LG Display (LGD) revenues increased 3.7% Q/Q and 6.7% Y/Y to ₩6268.73 billion in Q3’11. As you can see from the chart the overall revenue trend since 2003 has been up. Net income is a completely different story.

Net Income:

In Q2’11 LGD posted a net income of ₩21.3 billion, but Q3’11 turned out to be the second worst quarter in LGD history posting a net loss of ₩687.5 billion. Revenues increased but profits took a dive. What happened?

ASP:

The main reason for the poor performance is a persistent decline in ASP shown as ₩000 per square meter. ASP in Q3’11 declined 4.7% Q/Q and 5.2% Y/Y to ₩774,000 per square meter.

Input Capacity:

The main cause for the continued erosion of ASP is the continued increase in manufacturing capacity, which is calculated as glass substrate input capacity in millions of square meters. As you can see input capacity has continued to increase as far back as data is available.

In Q3’11 input capacity increased 2.7% Q/Q and 10.1% Y/Y to 11.5 million square meters. Most of this increase was geared toward large G8 fabs designed for LCD TV panel production. Unfortunately weak economic conditions have led to weak TV demand worldwide.

LGD does not break out profitability by application, but it is safe to assume the continued over dependence on TV led to a disastrous third quarter. Granted LGD has been reducing its dependence on TVs since Q3’10, when 58% of revenues came from LCD panels geared for TV applications. In Q3’11 only 47% of revenues came from TV.

Shipment:

Mature LCD fabs generally hit an overall yield of about 91%. But even so LCD shipments in square meters were only 77% of input capacity in Q3’11. LGD shipped 8.1 million square meters in Q3’11, an increase of 8.8% Q/Q and 12.5% Y/Y.

Generally third quarter is when most profits are made as the entire display supply chain reacts to a surge in demand by brands and retailers to build, ship, and stock what they think people will buy in November and December. Manufacturing activity cools down in the fourth quarter and it’s going to be rough for LCD manufacturers, including LGD.