Rare Samsung-LG alliance imminent on OLED TVs: sources

A rare partnership between crosstown rivals Samsung and LG seems imminent, as they are finalizing talks on LG’s panel supply for Samsung’s upcoming OLED TVs, industry sources said Thursday.

“Until early this year, the outlook for their partnership was dimming at least for this year. But the talks have recently been speeding up,” said an industry source on condition of anonymity.

The source predicted the first panel shipments could start as early as September, considering preparation work on production lines, which would lead to new TV launches later this year.

Samsung has recently started receiving preorders for its brand-new QD-OLED TVs in the US, but full-scale marketing activities are not being carried out largely due to panel shortages.

The world’s largest TV maker departed from the then-nascent OLED TV market almost a decade ago to focus more resources into upgrading LCD TVs with better profitability.

Now when OLED TVs make up almost 40 percent of premium TV sales globally and its archrival LG Electronics has become a dominant market leader, Samsung is coming back to renew competition in the burgeoning market.

But the comeback plans have hit a snag, with its display-making unit Samsung Display still struggling to improve the yield rate.

Samsung Display has a production capacity of 30,000 OLED TV panels per month, equivalent to producing an annual 1 million units of the popular 55-inch and 65-inch models.

Because the yield rate is usually low in its initial stage, the actual TV production is estimated to remain at some 500,000 to 600,000 units per year.

Given that OLED models make up 15 to 20 percent of total TV sales of its rivals like LG and Sony, Samsung needs to elevate its TV sales to some 3 million units in order to reach economies of scale.

The panel shortage has prompted Samsung to seek unprecedented help from LG Display, and longtime two rivals have continued talks for a possible partnership for months.

“It is a win-win deal: Samsung is securing panels crucial for its return to OLED, while LG has been beefing up production capacity to meet growing OLED demand,” said Lee Choong-hoon, CEO and top analyst at UBI Research.

But he agreed that it was a tough negotiation involving huge investments for both sides in a long-term contract for three to five years.

“Other than the supply volume and pricing, adjusting different interests among affiliates must have been a tricky issue,” he said, referring to the fierce rivalry between the two tech giants in almost all sectors from home appliances to displays.

“Their possible tie-up will be an outcome of compromises made by all affiliates of both Samsung and LG.”

Samsung’s new TV launch event Wednesday, where OLED TVs were absent again, raised speculation that Samsung was still struggling to secure panels due to stalled talks with LG.

“Samsung had planned for Wednesday’s event from late last year when uncertainty was looming over its talks with LG,” Lee said. “Samsung may also have had concerns about cannibalization of the newly launched Neo-QLED TVs.”

With the talks with LG gaining fresh momentum, sources said Samsung has also raised its sales target for OLED TVs to some 1.5 million to 2 million units this year.

Samsung’s return to the OLED market comes as its flagship QD-LCD sales are slowing amid robust growth in the premium OLED TV market.

According to market tracker Omdia, the global market for OLED TVs is estimated to see 9.6 percent growth this year, with its sales surging to $13.7 billion. In the meantime, the market for QD-LCD is set to post a 3.1 percent decline this year, a first fall since 2017, posting $17.6 billion in sales.

Amid rampant rumors about their OLED alliance, both Samsung and LG have reiterated that they are open to all possibilities for a win-win relationship, without elaborating on any actual plans yet.

By Lee Ji-yoon (jylee@heraldcorp.com)