As the focus has shifted for Samsung from the traditional business line towards the smartphone and tablet markets, the company is trying to figure out what to do with businesses that aren’t thriving. It is the case of the LCD business that Samsung is now looking for ways to separate from.
Reuters writes that Samsung Electronics Co is “considering various options to improve competitiveness of its loss-making LCD flat screen business”. The company’s spokesman Nam Ki-yung said that Samsung has several plans in mind, including a possible spinoff. Samsung’s LCD business had an operating loss of $668 million last year caused by slow TV sales.
Seo Won-seok, analyst at Korea Investment Securities, explains that “a spinoff will allow Samsung to focus more on OLED and also broaden its LCD customers base to companies that have shunned” the company before.
Ah Seong Ho, analyst at Hanwha Seoul, writes that “the logic of combining LCD and OLED businesses is quite persuasive. Samsung’s leadership in growing the OLED market will significantly be boosted”.
The industry has been refocusing towards the production of flat screen display TVs based on organic light emitting diode, also known as OLED. Currently the technology is used in high end smartphones but the market expects the OLED to replace LCD in TV screens.
And Samsung Electronics currently has a favorable position in the OLED market, holding more than 95 percent. LG Display Co also saw the potential of the market and is making its first steps in the OLED business.
According to DisplaySearch, the OLED display market is expected to grow to more than $20 billion by 2018, accounting for about 16 percent of the overall industry. As a comparison, last year the OLED market accounted for an estimated $4 billion.
Samsung Electronics’ decision comes in line with what analysts have been expecting for a while now. Reuters writes that analysts estimated “Samsung would take full direct control of its OLED flat screen business and merge it with the LCD operation to utilize part of LCD production capacity in making the more profitable new displays”.
Only a few months ago, Samsung Electronics announced that it has decided to end its partnership with rival Sony Corp. to produce large liquid crystal display screens for televisions.