Samsung Electronics Spends $1.74 Billion in 3rd Quarter to Purchase LCD Panels

Samsung Electronics’ Video Display (VD) Business Department is planning to take aggressive approach in expanding production of TVs as it faces peak season and New Year.

Following its biggest purchase of LCD panels in 3rd quarter, it also increased production’s rate of operation to its highest ever. This is Samsung Electronics’ groundwork to respond to attacks from Chinese TV businesses and recover its slump from 1st half of 2015.

According to Samsung Electronics on the 23rd, Consumer Electronics (CE) Department, which includes VD Business Department, spent $1.72 billion (1.9793 trillion KRW) to purchase LCD panels in 3rd quarter. It spent 2 times more than how much it spent in previous quarter at $856 million (986.2 billion KRW). Until now the most Samsung Electronics had spent in single quarter to purchase LCD panels was in 4th quarter of 2012 at $1.24 billion (1.4327 trillion KRW).

It is unusual to see how Samsung Electronics spent 2 times more than $868 million (1 trillion KRW), which is how much it usually spends per quarter. Its production’s rate of operation is 95.26%, which is also the greatest value per quarter since 2012 when statistics were announced.

Samsung Electronics explained that this is a response regarding upcoming situations of 4th quarter and next year. It is preparing for seasonal peak season such as Black Friday and Christmas when sales are made in bunch and is planning to actively respond to next year’s TV markets.

It can also be seen that Samsung Electronics is buying panels in bulk when they are cheap. According to market research company IHS, prices of LCD panels in all sizes decreased 20 to 30% compared to last year as prices of 32-inch and 40-inch decreased 31% and 24% respectively.

This happened because while TV manufacturers were modifying productions due to recession in 1st half, panel manufacturers’ stocks increased as panel manufacturers maintained high rate of operation. As panel manufacturers were even pushing out panels in stock, it was a positive situation for TV manufacturers to buy panels.

Large-sized purchase of panels implies that Samsung will actively respond to markets next year.

IHS is estimating that next year’s global LCD TV markets’ sizes will be about 228 million TVs, which is 3 million greater than this year’s. Samsung every time focused on higher shares compared to growth of markets as its goal.

Samsung Electronics is planning to focus on blocking off challenges from Chinese TV manufacturers in advance with its aggressive approach towards securing shares.

“Offensive approach towards expanding markets is expected from Chinese industries in 2016 as it will be the first year when Chinese industries are challenging foreign markets.” said researcher Nick Jang of IHS. China is widening its stride as Hisense is targeting North America by buying Sharp’s factories in Mexico and as Skyworth is buying Germany’s METZ brand.

“Looking at Samsung Electronics’ SCM (Supply Chain Management) aspect until now, it is unusual for it to spend $1.74 billion (2 trillion KRW) in a quarter.” said a person from this industry. “It can be seen as a preemptive response in order to recover from its slump in 1st half and to increase its gap from Chinese industries.”

Staff Reporter Seo, Hyeongseok | [email protected]