LG CEO Sacked As TV Sales Impact Business
As TV prices plummet and retailers move to shift stock in Australia the fortunes of the two biggest TV Companies in Australia LG and Samsung are coming under pressure with both Companies moving to shed staff in the display operations.
Yesterday LG called an emergency board meeting that saw the CEO of LG Display sacked and questions raised about the profitability of their current OLED operation.
In Australia Samsung disrupted the market earlier this year with a range of budget TV’s aimed at taking on the Chinese brands such as TCL and the bottom end brand Hisense.
Operating profit at Samsung Electronics more than halved in the second quarter because of weaker chip and panel prices, and analysts project that any industry recovery will not materialise until next year.
Globally LG Display is trying to turn around its fortunes as it grapples with headwinds including an economic slowdown in China, the Sino-US trade war and Japan’s restrictions on exports of key technology components and materials to South Korea.
The South Korean company, who with Samsung are a major supplier to Apple, unveiled a voluntary redundancy programme for domestic production workers.
That followed results last month showing its net loss widened $462m in its LG Display operation, due to lower prices for liquid crystal display panels.
The news of potential job cuts is rare for an LG group unit and came a day after the company replaced its chief executive at an emergency board meeting.
The company said on Monday that chief executive Han Sang-beom had stepped down to take responsibility for the company’s deteriorating performance. He was replaced with Chung Ho-young, president of affiliate LG Chem.
LG Display “is losing ground to Chinese rivals in the LCD sector while its expansion into smaller-size OLED panels has not turned profitable yet,” said CW Chung, head of research at Nomura in Seoul. “It will be difficult to turn around the company any time soon because of structural reasons.”
It was unclear how many of the company’s 23,000 workers at domestic production lines might take up the redundancy offer and how much the company could save from the possible job cuts. The company has 59,000 employees globally.
Analysts said the timing of the move was unusual, coming in the wake of the new iPhone launch last week that would bolster demand for panels. They said they believed LG was shipping OLED panels for the new iPhone from the third quarter.
However, Mr Chung said that was unlikely to be a big help for LG Display with smartphone sales slowing. Globally, smartphone shipments fell 4.1 per cent to 1.4bn units last year, according to IDC.
LG Display dominates the large-size OLED TV panel market and is accelerating its broader shift from LCD to next-generation OLED in the face of oversupply from Chinese LCD makers. The South Korean company has invested more than Won5tn since early 2018 in the production of small-size OLED screens to steal a march on its bigger rival Samsung Display, according to Shinhan Investment.
But that has yet to contribute to earnings and has increased the company’s net borrowings from Won2.2tn at end-2017 to Won8.9tn in June this year, said So Hyun-chul at Shinhan. He estimated that LG Display was facing an operating loss for this year of Won1.33tn.
LG’s restructuring efforts are the latest symptom of the broader tech sector downturn hurting Asia’s electronics manufacturers as the global economy slows and trade friction increases.