LG Display Runs Factories at Full Capacity, Yet Losses Persist

LG Display is facing what industry watchers are calling the "paradox of full operation": even as its key factories hum at near-maximum capacity, the company cannot escape red ink. According to its latest half-year business report, utilization rates at the company's main panel plants in Paju, Guangzhou and Gumi stood at 99.7%, 100% and 97.8% respectively in the second quarter, figures that would normally signal a healthy, demand-driven production line.

Shipment volumes backed up that picture. The area of panels shipped rose from 3.2 million square meters in the first quarter to 3.6 million square meters in the second, helping revenue edge up from 5.534 trillion won to 5.6121 trillion won over the same period. Yet profitability moved in the opposite direction. After three straight years of annual operating losses from 2022, LG Display returned to the black last year and posted a 146.7 billion won operating profit in the first quarter of this year. In the second quarter, however, it swung back to an operating loss of 108 billion won, partly due to roughly 240 billion won in one-off costs tied to voluntary early retirement programs. Stripping out those charges, the underlying result would have been a 132 billion won profit, but the recovery remains fragile.

The core problem is price, not demand. Average selling prices per unit area of LG Display's panels have fallen more than 20% over the past year, from about $1,365 in the third quarter of last year to roughly $1,079 in the second quarter of this year, squeezed by prolonged weak demand in end markets and intensifying price competition among panel makers. Because display manufacturing is a heavily capital-intensive business, idling or slowing production lines would leave depreciation and maintenance costs largely unchanged while cutting output, turning fixed costs directly into losses. Running plants at maximum capacity, even at thin or negative margins, is effectively the least costly option available to the company.

To break out of this structural bind, LG Display is pushing a broader overhaul rather than relying on volume alone. The company is applying artificial intelligence across its value chain, from research and product design to manufacturing, using AI-based simulation to shorten design cycles and real-time process-data analysis to cut defect rates, with the goal of achieving structural cost reductions. At the same time, it is accelerating a shift away from low-margin general-purpose LCD business, including plans to sell its Guangzhou LCD plant, in favor of an OLED-centered portfolio.

Industry watchers see the second half of the year as a potential turning point. Apple, which accounts for more than 40% of LG Display's revenue, is expected to launch new products that could sharply boost shipments of small and mid-sized OLED panels. Kang Min-gu, an analyst at IBK Securities, said mobile panel shipments industrywide are projected to hit a record high above 80 million units this year, giving LG Display a chance to capture a larger share of North American flagship orders as Chinese rivals struggle to secure volume. He cautioned, however, that rising memory chip prices are pushing up the memory share of smartphone bills of materials, which in turn keeps pressure on manufacturers to cut prices for non-memory components such as displays.