LG to invest less, cuts target by $3.7b

South Korea's LG Display slashes its investment plans by US$2.7 billion (S$3.7 billion) to 2020 on concern for the global smartphone market, becoming the second Apple supplier to scale back its spending plans within recent weeks.

SEOUL • South Korea's LG Display, a key Apple supplier, slashed its investment plans till 2020 by US$2.7 billion (S$3.7 billion) citing concern for the global smartphone market, as it posted a second straight quarterly loss on sagging panel prices.

The cut underscores the bleak outlook for electronics makers and comes a week after another Apple supplier, Taiwan Semiconductor Manufacturing Co, also scaled back its revenue and investment estimates.

"It is a conservative approach resulting from uncertainty around the mobile market," LG's chief finance officer Don Kim told an earnings conference call, referring to the capex reduction.

LG shares tumbled 7 per cent versus the broader market's 0.3 per cent fall after it flagged faster-than-expected panel price declines and an uncertain outlook. "Market conditions are turning favourable, but still the unpredictability is high," Mr Kim added. "Oversupply and asymmetrical competition are unavoidable."

LG said it would reduce its investment target by 3 trillion won (S$3.7 billion) from what was planned by 2020, without revealing its total or previous capex targets. It also warned that it could adjust production in South Korea and China in response to trade disputes between Washington and Beijing.

The investment cut would not impact plans to "speed up the shift" from LG's mainstay liquid crystal display (LCD) business towards next-generation organic light-emitting diode (Oled) panels, the company said.

CONSERVATIVE APPROACH

It is a conservative approach resulting from uncertainty around the mobile market.

MR DON KIM, LG's chief finance officer, on the firm's move to slash its investment plans till 2020 by US$2.7 billion (S$3.7 billion).

Plans to invest about 20 trillion won in Oled panels by 2020 remained unchanged, meaning the cuts would apply mainly to LCD operations. The Oled panel business has yet to make a profit for LG but the firm said it would be positive for earnings in the third quarter. "The LCD industry is already in a down cycle, which will be difficult for LG to get away from, so LG will concentrate more on Oled to differentiate," said NH Investment & Securities analyst John Ko.

LG posted an operating loss of 228 billion won on the back of declining panel prices, compared with an average forecast of a 247 billion won loss derived from a Thomson Reuters survey of 11 analysts.

REUTERS

A version of this article appeared in the print edition of The Straits Times on July 26, 2018, with the headline 'LG to invest less, cuts target by $3.7b'. Print Edition | Subscribe