Samsung’s (PINK:SSNLF) board of directors has given the company the go-ahead to spin off its money-losing liquid crystal display (LCD) TV business – confirming rumors that the Korean-based company believes its future in TVs is with LED and OLED technologies.
The world’s biggest TV and flat-screen producer, Samsung said the new, spun-off LCD unit will be called Samsung Display Ltd. and will launch on April 1, if shareholders approve the plan to make it a separate company. Samsung also said it is considering merging the new unit with its unlisted subsidiaries, Samsung Mobile Display and S-LCD. Samsung Mobile Display makes OLED panels; S-LCD was a joint manufacturing venture with Sony, until Samsung bought Sony’s shares last December.
Samsung also said its strategic initiatives also include a plan to merge Samsung LED, which specializes in LED imaging technology, into Samsung Electronics, with an aim to “nurture the LED business as the future growth engine of Samsung Electronics’ component business by utilizing its advanced technology, manufacturing competency, and global sales network.”
A slowing LCD screen market
Analysts had been expecting Samsung to spin off the LCD business, which lost money every quarter last year, and merge it with another division or enter into a partnership with rival Sony (NYSE:SNE). Growing competition and slowing demand for LCD TVs have also sunk profits at Sony, Panasonic (NYSE:PC), and Sharp (PINK:SHCAY), and each already has significantly reduced LCD output.
NPD’s DisplayResearch and other research firms are forecasting that global sales of LCD TVs will shrink 8% by 2015. As a result, the industry is focusing its efforts on the OLED market, whose TV share is expected to quadruple to about 16% by 2018.
OLED stands for organic light emitting diode—a technology allows manufacturers to deliver TVs whose screens are brighter, thinner, and have better refresh rates than LCD TVs, even on larger surfaces. OLED technology also works on flexible screens and those that have curves or irregular shapes.
Samsung and other TV manufacturers are counting on the technology to help them stay relevant in the industry, especially as China-based LG (PINK:LGEAF) grabs market share and Apple (NASAQ:AAPL) considers offering its own “Smart TV,” sometimes referred to as the iTV. Smart TVs will allow consumers to access the Internet, watch online videos, play games, and even manage their household appliances.
Samsung and LG are promising to deliver their first OLED TVs this year, and Samsung says it wants Smart TVs to account for 25 million of the 50 million units it hopes to sell in 2012.
But with LCD TVs priced below $1,000, OLED TVs may be a tough sell in these still uncertain economic times. NPD’s DisplaySearch predicts that 55-inch OLED TVs would sell for around $8,000 when they debut this year. That price, however, is expected to drop to about $4,000 by the end of 2013.
