LG Display to sell major LCD plant in Guangzhou for $1.5 billion

LG Display said on Thursday that it has agreed to sell its entire stake in a large LCD plant located in Guangzhou, China under a deal worth 2 trillion won ($1.5 billion), the company said in a regulatory filing.

The sale is viewed as a significant move towards the asset efficiency of LG Display since the LCD business has tallied up most of its accumulated losses. In this transaction, LG Display is likely to acquire financial flexibility for speeding up the transition to OLED technology.

Under the terms of the deal, LG Display would transfer all of its equity in the plant to China Star Optoelectronics Technology, which is wholly-owned by TCL, by March 31, 2025.

This LCD plant has two business lines: panels and modules. Each of the two is operated under a different corporate structure. LG Display owns 80% of the panel line, with the remaining 20% owned by the Guangzhou Development District. In contrast, the module line is 100% owned by LG.

LG Display had initially owned 70% in the panel division but bought a 10% stake from China’s Skyworth for 244 billion won earlier this month to raise it to 80%, as it steps up efforts to hasten the sale.

LG Display explained in its regulatory filing the sale is being done in “order to improve efficiency to focus on the OLED business.” It said that the transaction would further the competitiveness and stabilize its financial standing but was mum on what it intends to do with the 2 trillion won it has generated from the sale.

By selling, LG Display will rebalance its position in an otherwise overcrowded and fiercely competitive large LCD market-a place where Chinese rivals continue to hold advantages. In the past few years, LG Display has scaled back its large LCD operations, citing limited opportunities for product differentiation from Chinese competitors and increasingly volatile markets.

However, Chinese manufacturers are eager for the production of large LCD panels, with the majority of current display market shares dominating in TVs, thereby hastening LG Display’s resolution to sell out its share of the plant and focus on its other important businesses.

This will allow LG Display to close premium opportunities it had previously excluded from its list of prominent items, including small- and mid-sized OLED panels for IT devices.

According to industry analysts, LG Display leads the OLED market today by virtue of technology, but Chinese contestants such as BOE have managed to bridge the gap through huge investment in this crucial area. This in turn has left the industry experts worried that LG Display may go the same way it did with large LCDs, which is an area where other Chinese companies undercut their prices to grab the largest chunk of the market and further accelerate economies of scale.

Although the company has not declared what it will do with the proceeds from sale, market expects that it will infuse the same in OLED business of LG Display and enhance its financial strength .

It will retain the LCD business of LG Display- for IT devices and automobiles. It will concentrate on high end-low consumption, inimitable design, and resolution of higher devices.

With this deal, LG Display would reportedly end its production of big LCD panels for TVs in South Korea. Its arch-rival, Samsung Display, had sold its LCD plant in Suzhou, China to CSOT as early as 2020.