Apple supplier LG Display seeks to broaden smartphone client base
SEOUL (Reuters) - Flat-screen maker LG Display Co Ltd, a key supplier to Apple Inc, said on Thursday that it was seeking to broaden its smartphone customer base, betting that diversification would bolster its second-half earnings.
The move came as the South Korean company posted a forecast-beating 53 percent rise in quarterly operating profit, as stable prices of large-sized TV screens helped counter slower growth in mobile display shipments to Apple.
LG Display follows other Asian suppliers that are looking to ease their dependence on the iPhone maker because of seasonal orders fluctuations and as Samsung Electronics Co Ltd erodes market share from Apple. Japanese display maker Sharp Corp is now aiming to boost sales to Samsung.
Like many suppliers, LG Display does not officially identify Apple as a client but analysts and sources say that most of its mobile screens are sold to the U.S. company.
"In the smartphone business, a specific customer accounts for a relatively high portion" of our sales, Chief Financial Officer James Jeong told analysts after the earnings announcement.
"We are in talks with various firms on new product line-ups ... We will gradually diversify our smartphone customers," he said, adding that diversification would help improve its earnings in the second half of this fiscal year.
Jeong did not specify the customers that the firm is talking to, but industry sources say it is hoping to ride the coattails of affiliate LG Electronics Inc, whose once loss-making smartphone business is on a firm recovery track. LG Electronics is now ranked as the world's No.3 smartphone vendor after Samsung and Apple.
LG Display is widely expected to supply super-thin and full high-definition screens for the upgraded version of LG Electronics' flagship Optimus G smartphone due out in early August.
LG Display, which vies with Samsung's panel unit for the top position in liquid crystal display flat screens globally, made 366 billion won ($326 million) in operating profit for its April-June second quarter. That beat the average forecast of a 304 billion won profit in a Thomson Reuters poll of analysts.
But sales slipped 5 percent from a year earlier to 6.6 trillion won, missing analysts' expectations for 7.28 trillion won. LG Display said sales fell because weaker demand for screens used in mobile devices and laptops more than offset increases in total panel shipments.
Analysts expect LG Display to enjoy upbeat sales of screens used in mobile devices in the current quarter with Apple and LG Electronics planning to launch new products.
Apple is exploring launching iPhones with bigger screens, as well as less-expensive models in a range of colours, over the next year, according to people with knowledge of the matter.
But some analysts warn that profit margins could be squeezed if Apple does introduce low-end models, while sales of premium televisions using ultra high definition screens as well as organic light-emitting diode panels remain extremely weak.
A weak global market for televisions, the biggest source of LG Display's revenue, is also expected to pressure its earnings growth, analysts say.
Daiwa Capital Markets this month cut its 2013 global LCD TV shipment growth forecast to 2.2 percent from 4.2 percent. It now expects global PC shipments, another source of major flat-screen sales, will shrink 8.8 percent this year, sharper than its previous forecast for a 4.3 percent drop.
LG Display said it expects overall panel prices to weaken in the current quarter before they start to recover later in the period.
Shares in LG Display have dropped 12 percent over the past three months, lagging a 5.6 percent drop in the broader market. The stock closed down 3.1 percent prior to the earnings announcement.
(Reporting by Miyoung Kim and Hyunjoo Jin; Editing by Chris Gallagher)