As Chinese LCD (liquid crystal display) manufacturers push for price increases, the cost burden on Samsung Electronics and LG Electronics is expected to expand further. With domestic display companies exiting the LCD business, it has become difficult to avoid the ripple effects of China-driven price hikes, and rising memory semiconductor prices are adding to the burden. Samsung Electronics and LG Electronics plan to respond to cost pressure by strengthening cost competitiveness and improving operational efficiency.
According to industry sources on Monday, Chinese LCD panel makers such as BOE, CSOT, and HKC have raised panel prices starting from the fourth quarter of this year, citing rising raw material prices and supply chain costs.
They are also simultaneously cutting production in response to slowing demand. Market research firm TrendForce estimated that, due to the impact of production cuts by major Chinese panel makers, the utilization rate of large panel factories for 5th-generation and above panels last month fell by 4.2 percentage points (p) from the previous month to 79.6%. As of the first half of this year, these three companies' combined global LCD panel market share approached 70%.
With domestic display manufacturers halting production of TV-use LCD panels, Samsung Electronics and LG Electronics are structurally unable to avoid the direct impact of price increases by Chinese firms. Samsung Display decided on a complete exit from the LCD business in 2022, while LG Display decided last year to exit the large-size LCD business. TrendForce forecast that total TV panel costs will rise by 4% to 7% in the fourth quarter of this year compared to the previous quarter. Typically, display panels account for 40% to 50% of TV component costs.
Rising memory prices are also a factor increasing the cost burden on TV manufacturers. According to market research firm Omdia, mainboards accounted for 20% of the component cost of 75-inch UHD (ultra-high definition) smart TVs in the second quarter of this year, reaching 2.5 times the level of the same period last year (8%). Mainboards are equipped with memory semiconductors such as DRAM and NAND flash. In some small LCD TVs, the cost share of memory was found to exceed that of display panels.
Profitability pressure from rising component prices may continue into next year. Park Sang-ho, Senior Executive Vice President of LG Electronics' Mobile Communications (MS) Division, stated in a conference call for the third-quarter earnings announcement: "LCD panel prices are expected to remain slightly flat in the fourth quarter of this year before facing greater upward pressure starting from the first quarter of next year." He added, "In particular, in mid-to-low-priced product segments where price competition is fierce, it is difficult to reflect cost increases in selling prices, which could further increase profitability burdens."
Adding to this are concerns over slowing global TV demand, which is expected to increase uncertainty in the business environment. Kim Won-woo, Executive Vice President of Samsung Electronics' Visual Display (VD) Division, predicted in a conference call for the third-quarter earnings announcement: "TV market demand in 2027 will either stagnate or decline slightly."
The two companies plan to respond to rising costs by strengthening cooperation with major panel manufacturers and adjusting their procurement strategies. On the 30th of last month, Samsung Electronics acquired a 10.16% stake in CSOT, a panel subsidiary of TCL, from Samsung Display. This move is interpreted as an effort to secure a stable supply base amid increased reliance on Chinese-made LCD panels. Separately, Samsung Electronics is also pursuing measures to adjust procurement timing according to panel supply and price trends, and to diversify its suppliers.
An industry official said, "Chinese panel makers hold market dominance and can influence prices by adjusting production volumes." The official added, "As the share of large and premium TVs expands, combined with year-end peak season demand, pressure on panel prices could intensify."
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