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MAY 2008 W5 ALERT
Following Pioneer's Footsteps, LG to Shift Resources from Plasma to LCD
Major refocusing of product strategy as LCD show greater growth potential
 
<Nikkei-SEOUL><May 28, 2008>The Nikkei is reporting that LG Electronics, Inc. will begin a significant shift of resources away from its plasma operations and increase investment into LCD technology. According to comments made by LG CEO and Vice-Chairman Yong Nam, the company hopes to improve profitability by limiting further investment into its plasma facilities.

And profit is a clear concern for the company as it showed its first profit in the first quarter of 2008 after five consecutive quarters of losses from the plasma division. They attribute the profit to a combination of increased demand and a slow down in the pace of price reductions.

LG is the second largest manufacturer of plasma panels world wide. They have been locked in a fierce market share battle with Matsushita Electric Industrial Co., and Samsung SDI Co. And of course, keeping the LCD business from eroding their market has also been an additional challenge.

The plan that LG unveiled provides for a “status quo” program with shipments for this year planned at 6 million units compared with last year’s 6.5 million units. Focus will then shift to LG’s LCD operations which last year shipped 80 million LCD units.

The Nikkei report suggests that Samsung SKI, who is third in market share for plasma has also been losing money and very likely will follow LG’s lead with a similar decision.

All of which suggests that LCD technology is finally beginning to supplant plasma as the technology of choice for consumers. DisplaySearch forecasts that demand for plasma TVs will grow 57% from 11.27 million units this year to 17.73 million units in 2012. LCD demand, however, is expected to grow from 79.33 million units to 163.69 million units over the same period of time.

In March of this year, Pioneer had announced that they would cease production of plasma panels. Hitachi Ltd., has also shifted their business putting more emphasis on LCD TV. Only Matsushita continues with a specific focus on plasma…although they remain a strong player in the LCD panel business as well.