Joint venture LG Philips has reported disappointing Q3 2005 profits.
The 50-50 flat-screen joint venture between LG Electronics and Philips Electronics is one of the world’s largest makers of liquid crystal displays (LCDs). However, for the quarter ending September 30, 2005, the South Korea-based screen maker reported net income down 22% at KRW227 billion ($218 million) compared to KRW291 billion ($280 million) in the year-ago period. Sales, however, increased 46% to KRW2.74 billion ($2.63 billion) from KRW1.88 billion ($1.8 billion) in the year-ago quarter.
Like other flat-panel makers, LG Philips has been hurt by from tumbling prices of flat-panel displays amid a worldwide supply glut. Prices of LCDs have dropped at a double-digit rate since late last year in an effort to rid the channel of excess inventory. Price cuts were necessary as customers continued to opt for cheaper priced CRT televisions, which often offer superior picture performance to flat panels.
This is bad news for makers of flat screens for televisions and computer monitors, which spent a record $13 billion on plants and equipment last year and, according to researcher DisplaySearch, could face a surplus for at least the next three years.
The good news is that LCD TV demand worldwide is poised to more than double to 22 million units this year, according to Samsung Electronics, which also happens to be the world’s biggest maker of LCDs.
LG Philips said it also expects prices to fall in the fourth quarter. Average prices by the end of the year will be flat to slightly down from the end of September, the company said, without specifying a figure. Average prices in Q3 fell 26% from a year earlier and increased 2.9% from Q2 to $2,121 per square meter, the company said.
Average Q3 prices of panels used in desktop computers, which account for more than half of demand, fell 21% from a year ago, according to DisplaySearch estimates. LCD TV and notebook panel prices have also dropped, the researcher said.
