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LGD Bottoms Out; Revenues Down 5% Y/Y and Operating Income Suffers Loss of $327m
 
LG Display  reported Q318 sales of 5.822b KRW ($4.97b), +9% sequentially,  but -5% Y/Y, while operating income was a loss of 437b KRW (-$372.8m), vs. 369 in Q219. Shipment area (m2) declined by ‾4% but ASPs rose ‾12.5% on a square meter basis as the company lowered utilization  and moved production toward higher margin displays.  As the price of TV panels has been dropping faster than other categories, and the company has been reducing Gen 8 LCD utilization. Panels for TVs accounted for 32% of the revenue in the third quarter of 2019, 9% down from the previous quarter due to the reduced utilization rate of LCD TV panel plants, while those for mobile devices accounted for 28%, 9% up quarter-on-quarter, driven by an increase in POLED sales. Panels for tablets and notebook PCs accounted for 21% and desktop monitors for 18% respectively.
 
LG Display recorded 161% in the liability-to-equity ratio, 101% in the current ratio, and 74% in the net debt-to-equity ratio as of September 30, 2019. The increased ratios of liability-to-equity and net debt-to-equity compared with the previous quarter was mainly due to the company's strategic investment into its shift towards an OLED-focused business structure. The company will cut capex from 8t KRW to 7.5t KRW and will ‘downsize’ two of its Gen 8.5  LCD fabs.
 
LG Display is progressing to the final qualification stage as to supplying Apple with small panel LCD displays for the iPhone SE smartphone that has been rumored for early next year.  If they pass muster, this will allow them to participate in what will likely be a high volume, long-lived Apple product, and reduce the company’s dependence on its parent’s smartphone prospects.  LG Display still needs to convince Apple (and other potential customers) that it can produce high quality, stable, small panel flexible OLED displays and has 6 months to improve its small panel OLED process before Apple makes its final cut  Contributing to the loss has been the low yields the Guangzhou plant, which started initial operation at the end of August. “Although LG Display’s goal was to increase the yield in a short period of time similar to the experience of its LG Display’s Paju plant, current yield is reportedly between 50 and 60%, significantly less than the 90% goal. Contributing to the lower yield scale-up are the new technologies that were never attempted at the Paju plant, such as Multi-Model Glass (MMG) In order to increase luminous efficacy, LG Display changed some of its material suppliers and the stack, which may also be a factor in the lower yields.  There are reports that LG Display will postpone MMG due to initial lower yields. From twst.com and Etnews