Firm expands LCD production
South Korea's LG Display said it plans to spend 1 trillion Korean won (£491 million) to build a new liquid display production line.
LG Display, the world's second-largest LCD maker by sales after Samsung Electronics, plans to build a sixth-generation production line that will likely begin operations in the second quarter of 2009, the company said in a statement to South Korea's stock exchange.
But the announcement drove down the company's share price amid worries that the additional output will worsen an anticipated supply glut of the panels, used for TVs and computers.
"The LCD industry will experience oversupply from October this year," said James Kim, an analyst at Lehman Brothers.
The investment will help boost its 2008 capital expenditure to 3.6 trillion won (£1.7 billion) from an earlier guidance of 3 trillion won (£1.47 billion), LG said.
LG Display's capital spending will then decline to about 1.8 trillion won (£884 million) in 2009 as demand for LCD panels slows down, said LG Display Chief Executive Kwon Young's at an analysts' meeting.
Kwon said the company is reducing TV panel output by switching some of its LCD lines to produce information technology panels - for computer monitors and notebook screens - because some of its TV panel clients are experiencing weakening demand.
The executive expressed confidence that by strengthening its technology panel business the company would withstand potential oversupply in 2009, citing that as a reason why it is adding the sixth-generation line.
LG Display's major TV panel customers include LG Electronics, Philips Electronics of the Netherlands, Vizio and Toshiba.
Analysts said LG Display's shares could fall further in coming weeks amid concerns that Philips Electronics will further sell down its stake in the Korean LCD maker from June 10, when a lock-up period for its last sell down ends. In March, the Dutch firm lowered its stake in LG Display to 13.2% from 19.9% as part of its strategy to unload its shareholding in overseas affiliates.
