Worldwide No. 2 in the production of LCD panels for use in LCD flat panel televisions LG.Philips
The joint venture between Korea's LG Electronics and the Netherlands' Philips
Something else we've been looking for is falling prices (the cause of the drop in profits) on LCD panels to translate into increased demand among consumers -- and for that demand to help boost profits right back up. LG.Philips' report contained a few clues that such a trend may be beginning. While sales of the company's products in the quarter just passed were down 9% year-on-year, they actually rose sequentially -- up 3% against Q3 2004. Further bolstering this view was LG.Philips' explanation of the make-up of the year-on-year revenue decline. The prices LG.Philips was able to charge for its panels dropped (lowering revenues overall), but the number of panels sold increased (mitigating the decline in overall revenues).
Another interesting fact: Sequentially, you could already see demand for LCD panel televisions rising over last quarter, as LCD panels began to make up a larger proportion of total revenues. Over the past three months, the proportion of LG.Philips' revenues derived from desktop computer monitors declined, while those from notebook computer screens held steady. But revenues from TV panels increased. The changes were minimal, but the fact that they were noticeable at all over such a short period of time is notable.
As for the future, in the near term, LG.Philips expects to see more of the same in early 2005: increasing volumes of product moved; decreasing profits per unit. But if those decreasing profits per unit do indeed spur demand among consumers, the company should see its picture begin to brighten around mid-year. So LG.Philips shareholders probably have another couple of quarters to wait for truly good news. In contrast, investors in flat panel TV retailers such as Gateway
Want to learn more about the investment potential of the LCD producers? Read:
- Sony's Plasma Perils
- Toshiba to Arm Canon
- Sharp's Cutting-Edge Fab
- Corning Calls It Right
- Sony's Flat Faux Pas
- LG.Philips: This Side Up
Fool contributor Rich Smith owns no shares in any company mentioned in this article.
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