MANHASSET, N.Y. Faced with lagging profits the first half of the year, South Korean electronics giant Samsung Electronics Co. Ltd. may slash its hefty investments in liquid crystal display (LCD) manufacturing if the trend continues, according to a Korea Herald report.
According to the report, Samsung has earned an operating profit of $35.1 million (36 billion won) the first half this year, down 97.8 percent compared to last year.
Last year, Samsung’s LCD division earned an operating profit of $1.9 billion (2 trillion won).
"We did not fare well in the first and second quarters this year, and should the LCD sector continue to lose profitability, we may consider making adjustments to the investment figures," a company spokesperson was quoted as saying in the report.
However, Samsung, the second largest global LCD supplier behind LG.Philips LCD, will keep its existing LCD investment plan for the time being, he said.
The report said Samsung allocated $2.8 billion (2.86 trillion won) to invest in its LCD division early this year, and has spent $60 million (62 billion won) of it in the first half.
Earlier this month, Samsung said it would invest an additional $1.7 billion
to expand output at its seventh-generation LCD plant in Tangjeong, South Chungchong Province. The company expects the expanded plant to produce 150,000 LCD panels a month, to meet the needs of the growing market for 40-inch LCD TVs.
"We have a brighter outlook for the third and fourth quarters as the price cuts are expected to make it more affordable to a broader range of consumers," the spokesperson was quoted as saying.
The spokesman reportedly also said the stronger won and increased oil and raw material prices have negatively affected the LCD sector's performance this year.
The Korea Times
report also quoted Samsung executive Yun Jong-yong echoing concerns about the group's LCD division in a recent interview with British daily Financial Times
, fueling speculation the company may reduce its investment in the sector.
Samsung's predicament illustrates the vulnerability of LCD suppliers to fast-changing market forces and the consequences of gambles
they have taken in an ultracompetitive business.
Jun Sook, executive vice president of Samsung Electronics Co., said in a conference earlier this year that LCD suppliers needed to engage in hefty capital spending to maintain pace with rivals and hold onto market share.
Industry analysts such as DisplaySearch Inc. have previously noted that profitability for LCD suppliers has been elusive this year, and are projecting an oversupply in LCDs next year—a scenario that in the past has led to cuts in panel prices and production.