LG Display drops on TV price war concerns

SEOUL (Reuters) - Shares in LG Display Co Ltd (034220.KS) fell more than 5 percent early on Friday, despite the firm's strong quarterly results, due to growing concerns that the market position of its key client TV makers is weakening.

Analysts said aggressive marketing by leaders Sony Corp (6758.T) and Samsung Electronics Co Ltd (005930.KS) in the key North American TV market threatened the market share of LG Display's client brands, such as Philips (PHG.AS), LG Electronics (066570.KS) and Vizio.

By 0146 GMT, LG Display was down 4.76 percent at 44,000 won in a wider market .KS11 that was down just 0.2 percent. The stock fell as much as 5.4 percent earlier in the session.

"LG Display's clients will inevitably take a hit from Sony and Samsung's aggressive price cuts," said Park Sang-Hyun, an analyst at CJ Investment & Securities.

LG Display reported on Thursday a record operating profit in the usually slow January-March quarter, helped by tight panel supplies and surging demand for flat-screen televisions ahead of the Olympics in Beijing in August.

However, chief financial officer James Jeong warned that Sony's price-driven marketing could affect LCD screen prices and sales in the second quarter.

Meanwhile, shareholder and major client Philips Electronics said this week it would transfer its struggling North American TV business to Japan's Funai Electric (6839.OS), triggering worries that LG Display could lose screen orders for the market.

Chief executive officer Kwon Young-soo said late on Thursday Sony's price cuts appeared to be "excessive" and were unlikely to be sustained.

"I don't think Sony will continue with it," Kwon told reporters, adding Sony's price cuts target the North American and Chinese markets. Kwon's comments had been embargoed until Friday.

DEMAND HEALTHY

The LCD TV market is seeing stronger-than-expected demand for small-size sets as consumers switch to sleeker TVs from bulky tubes at ever-faster rates, Kwon said.

"Demand for small-sized TVs and cheaper notebook computers is something we hadn't expected and counted on," Kwon said, adding an oversupply in 2009 will be milder than expected.

South Korea-based LG Display is set to start mass production from its new "eighth-generation" production line early in 2009, when the market is expected to tilt toward an oversupply.

Kwon said the mass production could start one or two months earlier than the original schedule of March or April.

"Lots of panels from the 8G line should go to China," Kwon said.

LG Display posted 881 billion won ($903 million) in first-quarter operating profit on a consolidated basis, against a 208 billion won loss a year earlier. Net profit came to 717 billion won against a 169 billion won loss a year earlier.

In the fourth quarter of 2007, Sony jumped four spots to become No. 1 in LCD TV shipments in North America with 12.8 percent market share. Samsung ranked second with 12.3 percent, followed by Vizio with 10.8 percent, according to DisplaySearch.

(Reporting by Rhee So-eui; Editing by Marie-France Han and Anne Marie Roantree)