LG Display Struggles for Footing After LCD Forecasting Error Leads to Crisis

LG Display Struggles for Footing After LCD Forecasting Error Leads to Crisis

The chief executive of South Korea’s LG Display, Han Sang-beom, was determined to deliver a strong message when he appeared before 1,000 employees at the firm’s main manufacturing plant last spring.

So he donned a pair of goggles, picked up a hammer, and smashed a liquid-crystal display screen to bits.

The symbolism was impossible to miss: LCD panels, the company’s mainstay for years, were being relegated to the industrial dustbin. The company’s future would depend on a newer technology, organic light-emitting diode, or OLED.

“I’ve never seen him do such a thing,” said one company official who was present. “His performance showed a grim determination to weather this crisis.”

Yet LG Display’s predicament was in many ways one of its own making. Less than a year earlier, the company had showered employees with perks and bonuses as profits rolled in, driven by the company’s leadership in LCD screens for TVs, computer monitors and smartphones.

But LG Display had misread the market: Chinese competitors were coming on strong, and by early this year prices for LCD screens were plummeting. The fat profits of 2017 turned into big losses in 2018 – and the company abruptly announced in July that it would slash $2.7 billion in capital spending it had planned through 2020.

It did not reveal its total or previous targets but made about $6 billion in capital expenditures in 2017, according to Eikon data.

The company’s troubles stand as a stark example of the risks inherent in hotly competitive technology businesses that require massive capital investment.

“It seems that LG Display made a major miscalculation on its LCD business, not accurately judging the timing to pull away when they could see China’s rapid catch-up,” said Lee Won-sik, an analyst at Shinyoung Securities.

“We knew from last year LCD prices would go down but we did not expect this big and fast fall,” acknowledged one LG Display official, who, like others in this article, declined to be identified because he was not authorised to speak to the media. “Customers had been asking for price cuts, but we didn’t act until it got too late.”

Prices in free fall

LG Display posted five straight years of strong profits after Han took the helm in 2012, riding a tide of LCD screen orders from Apple and strong demand for both phone and TV screens from LG Electronics, which owns more than a third of the display-maker.

LG Display also began to invest in OLED displays, which unlike LCD screens don’t require backlighting and can deliver more natural-looking colours. OLED screens also consume less energy and can be bent and folded.

But the technology is expensive, and LG Display was earning the vast majority of its revenue from LCDs. Until its recent cutbacks, it was running eight LCD production lines in South Korea and another in China.

While LG Display hummed along, Chinese companies, led by BOE Technology Group, were pouring huge sums into LCD production.

By January 2017, BOE had become the No. 1 supplier of LCDs larger than 9 inches, according to market tracker IHS Markit, taking 22.3 percent of unit shipments versus 21.6 percent for LG Display. It was the first time a Chinese display maker had taken the top spot.

By early 2018, prices for many types of LCDs were in free-fall. Prices for 50-inch LCD television panels, for example, slid 32 percent in August versus the same month last year, according to IHS Markit.

LG Display’s big South Korean rival, the display unit of Samsung Electronics, had begun pulling back from LCD years earlier, shutting down older LCD production lines in South Korea beginning in 2010, according to a Samsung Display official. The company now has just two LCD factories in South Korea and one in China.

But LG Display was caught flat-footed and is now furiously slashing LCD capacity. It has closed three LCD production lines since last year and abandoned plans for a new one.

The company in April also rolled out an “emergency management system,” with employees being told to use cheaper flights and cut back on group meals, company sources told Reuters. Cash flow has become a concern: it was negative 838.2 billion won ($743.93 million) in the second quarter, according to Eikon data, and has been negative for three straight quarters.

Three company sources say the company is not planning layoffs for fear of losing talent to China, but some employees are frustrated with cuts in benefits.

“Executives are trying to keep the morale up, telling us media reports about a voluntary redundancy program are false,” a company source with knowledge of the matter said.

OLED a game changer?

LG Display is now betting the house on OLED, and says it can fund $17.6 billion in OLED investments over the next three years. It expects the newer technology to account for 40 percent of revenue by 2020, up from just 10 percent today.

As OLED becomes more prevalent, LG Display’s fortunes could turn, analysts say.

LG Display’s OLED panels have helped its sibling, LG Electronics, take the lead in high-end televisions. Some analysts believe LG Display has been pressured to supply those panels cheaply, hurting its profitability, though the company denies that is the case.

But the OLED market promises to be tough. Samsung boasts that it has been investing in OLED since 2005. BOE is getting into OLED too. There are also still technical challenges in making large-panel OLED TV screens that don’t wear out too quickly, noted Ross Young, CEO of research provider Display Supply Chain Consultants.

Son Young-jun, LG Display’s vice president of public relations, said in a statement that the company is the only producer of large-size OLED displays and had “unmatched technological expertise” in OLED. “The potential and outlook ahead is promising,” he said.

LG Display says its OLED division will turn a profit in the third quarter. It also expects LCD prices to stabilise, enabling it to squeeze profits from the older technology until the newer one matures.

“Given OLED is our answer and solution to the crisis, there’s nothing else we can do other than tightening our belts and pushing for OLED,” a company official said.

[“Source-gadgets.ndtv”]

World Bank warns of learning crisis in education in countries like India

File photo. “This learning crisis is a moral and economic crisis,” World Bank Group President Jim Yong Kim said. Photo: AP

File photo. “This learning crisis is a moral and economic crisis,” World Bank Group President Jim Yong Kim said. Photo: AP

Washington: The World Bank has warned of a learning crisis in global education particularly in low and middle-income countries like India, underlining that schooling without learning is not just a wasted development opportunity, but also a great injustice to children worldwide.

The World Bank in a latest report on Tuesday noted that millions of young students in these countries face the prospect of lost opportunity and lower wages in later life because their primary and secondary schools are failing to educate them to succeed in life.

According to the ‘World Development Report 2018: ‘Learning to Realise Education’s Promise’, released on Tuesday, India ranks second after Malawi in a list of 12 countries wherein a grade two student could not read a single word of a short text. India also tops the list of seven countries in which a grade two student could not perform two-digit subtraction.

“In rural India, just under three-quarters of students in grade 3 could not solve a two-digit subtraction such as 46 – 17, and by grade 5 half could still not do so,” the World Bank said. The report argued that without learning, education will fail to deliver on its promise to eliminate extreme poverty and create shared opportunity and prosperity for all. “Even after several years in school, millions of children cannot read, write or do basic math.

This learning crisis is widening social gaps instead of narrowing them,” it said. Young students who are already disadvantaged by poverty, conflict, gender or disability reach young adulthood without even the most basic life skills, it said. “This learning crisis is a moral and economic crisis,” World Bank Group President Jim Yong Kim said. “When delivered well, education promises young people employment, better earnings, good health, and a life without poverty,” he added.

“For communities, education spurs innovation, strengthens institutions, and fosters social cohesion. But these benefits depend on learning, and schooling without learning is a wasted opportunity. More than that, it’s a great injustice: the children whom societies fail the most are the ones who are most in need of a good education to succeed in life,” the Bank president said.

In rural India in 2016, only half of grade 5 students could fluently read text at the level of the grade 2 curriculum, which included sentences (in the local language) such as ‘It was the month of rains’ and ‘There were black clouds in the sky’. “These severe shortfalls constitute a learning crisis,” the Bank report said. According to the report, in Andhra Pradesh in 2010, low-performing students in grade 5 were no more likely to answer a grade 1 question correctly than those in grade 2.

“Even the average student in grade 5 had about a 50% chance of answering a grade 1 question correctly—compared with about 40% in grade 2,” the report said. An experiment in Andhra Pradesh, that rewarded teachers for gains in measured learning in math and language led to more learning not just in those subjects, but also in science and social studies—even though there were no rewards for the latter.

“This outcome makes sense—after all, literacy and numeracy are gateways to education more generally,” the report said. Further a computer-assisted learning program in Gujarat, improved learning when it added to teaching and learning time, especially for the poorest-performing students, it said.

The report recommends concrete policy steps to help developing countries resolve this dire learning crisis in the areas of stronger learning assessments, using evidence of what works and what doesn’t to guide education decision-making; and mobilising a strong social movement to push for education changes that champion ‘learning for all’. PTI

[“Source-livemint”]

Samsung Electronics CEO Says Firm Must Learn From Crisis

Samsung Electronics CEO Says Firm Must Learn From Crisis

Samsung Electronics Co Ltd Chief Executive Kwon Oh-hyun on Tuesday said the South Korean tech giant must improve, as it reels from the costly withdrawal of its Galaxy Note 7 smartphone.

Without referring directly to the failure of the fire-prone Galaxy Note 7s, Kwon said in a statement Samsung employees should look back and ask whether they had been complacent in their work.

“We have a long history of overcoming crises,” Kwon said.

“Let us use this crisis as a chance to make another leap by re-examining and thoroughly improving how we work, how we think about innovation and our perspective of our customers.”

(Also see: Samsung Looks Beyond Batteries for Reason of Galaxy Note 7 Fires)

The global smartphone leader and Apple rival last week said it aimed to recover quickly from the withdrawal of the fire-prone Galaxy Note 7 in October.

The debacle raised concerns about Samsung’s quality control systems and dragged its third-quarter mobile earnings to their lowest level in nearly eight years, but so far no one at the firm has been publicly held responsible.Samsung is expanding its probe into the Galaxy Note 7 fires beyond batteries, as it tries to get to the bottom of one of the worst product failures in tech history.

© Thomson Reuters 2016

Samsung Galaxy Note7

Samsung Galaxy Note7

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Display

5.70-inch

Processor

1.6GHz octa-core

Front Camera

5-megapixel

Resolution

1440×2560 pixels

RAM

4GB

OS

Android 6.0.1

Storage

64GB

Rear Camera

12-megapixel

Battery Capacity

3500mAh

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