In order to avoid saturation of the high-end smartphone market and increase market penetration in India and China, Samsung Display will reduce AMOLED panels and increase LCD panel production in 2014.
Samsung Electronics wants to turn their focus to mid-market LED handsets in 2014, but this change in business strategy will have an impact on Samsung Display’s business performance.
“We have to increase the supply of cheaper LCD panels instead of OLED panels with higher added value due to Samsung Electronics’ business strategy,” said Samsung Display, adding, “Although the supply volume might become larger than before, it is almost sure that we cannot avoid a drop in profitability.”
The average price for 3.1 inch and higher OLED panels produced by Samsung Display at the end of 3Q was US $44.6, significantly higher than US $16.48 for LCD panels. LCD profitability is four to five times higher than that of OLED, according to Business Korea.
Samsung Display announced earlier this month that the company has integrated their OLED and LCD divisions. “To respond to the rapidly changing market environment, as well as to proactively cope with the changes in management environment, we decided to shift toward an integrated system,” said a Samsung Display official.
According to a report in Business Korea, Samsung Display mainly focused on AMOLED panel production with Samsung Electronic their main client, accounting for over 60 percent of its gross sales. “Besides, Samsung Electronics has recently demanded that the supply price of AMOLED panels be cut by at least 10%, although we cannot reveal the exact number,” an official at Samsung Display added.