Samsung, the world’s largest TV maker, has been forced to seek help from its arch rival, according Bloomberg. This will be the first time that the two South Korean companies exchange LCD panels. It has arisen out of necessity, following a chain of interesting events.
A chain of events
China’s Foxconn has acquired Sharp. That may sound unrelated but it has led to a chain of events that have shaken up the entire supply chain for LCD TV panels.
Foxconn wants to sell TVs under the Sharp brand but before Foxconn took over the Japanese company, Sharp sold the US rights to its TV brand to Hisense. Foxconn wants to renegotiate that deal but Hisense has refused, leading to Foxconn cutting off supply of LCD TV panels to Hisense. To build up capacity for its own TVs, Foxconn has also stopped supplying Samsung with LCD TV panels through its subsidiary Sakai Display.
Samsung recently shut down a 7G LCD factory that was producing LCD TVs panels in the 40-inch segment. This chain of events has led to a shortage of LCD TV panels, which could lead to higher prices for consumers.
- “The abrupt supply halt by Sharp will have a domino effect on other TV makers from Samsung to Sony,” said Chung Won-suk, an analyst at HI Investment & Securities Co. to Bloomberg. “That will cause the supply shortage to persist throughout the year and help sustain the price rally at least until the first quarter.”
Samsung forced to go to LG.Display
The shortage has forced Samsung to look for alternatives and it appears that LG.Display is the only supplier who can supply Samsung with enough panels.
This is of course a remarkable turn of events since the two South Korean companies are arch rivals. It will also be the first time that the two exchange LCD panels. Samsung is the world’s largest manufacturer of TVs and LG.Display – LG’s display production arm – is the world’s largest manufacturer of LCD and OLED TV panels.
The two companies have confirmed only that they are in talks.
Bloomberg claims to know that Foxconn - through its subsidiary Sakai Display - supplied Samsung with as many as 4 million LCD TV panels annually. LG.Display will supply Samsung with up to 3 million LCD panels annually. Samsung has sued Foxconn in the US and sought $429m in compensation.
The deal only covers LCD panels. It is very unlikely that Samsung will source OLED panels from the arch rival. The LCD panels from Foxconn were so-called IPS LCDs that have been used in some of Samsung’s affordable 5 and 6 series TV. LG.Display produces only IPS LCD TV panels. In the more expensive TVs – such as this year’s “QLED” – Samsung will continue to use its own VA LCD panels.
Is this the beginning of a beautiful Korean partnership or just a temporary deal? Time will tell.