LG Philips LCD To Be Squeezed by Low TV Module Pricing

| About: LG Display (LPL)

The updated price data this morning from Witsview confirms that TV module pricing is still in free fall with drops in the last two weeks of $10 at 32" and 37" and $20 at 40" and 42"; this represents 2.7% for all but the 37" format, where the fall was a "modest" 1.8%.

Monitor module trends have reversed dramatically, with a 5.5% rise for 17" monitors and 1.6% for 19"W. Notebook prices are unchanged since mid-July.

Very shortly, consumer electronics brands should be increasing their purchases for the holiday season, and prices should begin to stabilize, at least at 32" and 37". 40" and 42" are competing with one another, and therefore further price drops are inevitable.

Note that this is particularly bad news for LG Philips LCD (NYSE:LPL) since Samsung can afford to lower the price of a 40" module as close to half their modules in this size are consumed by their own TV brand, where they can make up for the loss of margin on the module. But LPL's financial interest ends when the module is shipped. As they drop the 42" price to stay in touch with Samsung (an absolute requirement), they are delaying their financial recovery.

Since LPL is the dominant supplier of 42" modules to the market with their Gen 7.5 fab, Samsung can squeeze them in what is a very Korean battle - for the coveted number one spot in the market.