With sluggish iPhone sales and intense competition from Chinese panel manufacturers, Samsung Display (SDC)'s operating profit in the first quarter of 2024 saw a 56% year-on-year decrease. How SDC will respond to this has received a lot of attention.
According to South Korea's TheElec, Samsung Electronics recently released its financial report for the first quarter of 2024. The revenue of its panel subsidiary, SDC, amounted to KRW5.39 trillion (approx. US$3.9 billion), with an operating profit of KRW340 billion. This represents a year-on-year decrease of 18% and 56%, with a quarterly decrease of 44% and 83% respectively.
Source: Samsung, compiled by DIGITIMES, May 2024.
Industry analysis suggests that the significant decline in operating profit for SDC in the first quarter of 2024 is largely due to the weak sales of the iPhone in the same period, as flexible OLED panels used in iPhones account for over 70% of SDC's operating profit. According to market research firm IDC, iPhone shipments in the first quarter of 2024 totaled 50.1 million units, a 9.6% year-on-year decrease, with particularly noticeable sales declines in the Chinese market.
Amid the downturn in iPhone sales, Chinese smartphone manufacturers are expanding their inventories of smartphones and OLED panels to seize the gap left behind by the iPhone. Companies such as BOE, TCL CSOT, Tianma, and Visionox expect to fully utilize their 6th generation flexible OLED production lines by the end of 2024.
At the same time, there has been an increase in demand for SDC's rigid OLED panels, which has led to an increase in the utilization rate of A2 rigid OLED production lines, effectively mitigating the decline in revenue. However, to compete with Chinese manufacturers's flexible OLEDs, SDC couldn't raise prices, which affected profitability.
SDC stated that in the small and medium-sized display business in the first quarter, flexible OLED production responded timely to the launch of high-end smartphones by major customers, and the utilization rate of rigid OLED also improved due to increased sales. However, due to intensified market competition, revenue declined slightly. In the second quarter, although sales are expected to grow with the expansion of demand for new foldable devices and IT products, performance improvement will likely be limited due to market competition.
Regarding the large-size display business, market demand declined during the slack season, but Samsung effectively reduced the scale of losses by launching new QD-OLED products. In the second quarter, it will steadily meet the demand of major customers and promote the sales of high-end displays.
Looking ahead to the second half of the year, SDC expects a slight growth in the smartphone market compared to 2023, with OLED penetration continuing to increase. Therefore, it will maintain its competitive advantage through low-power-consumption, high-durability flexible OLEDs, while accelerating the replacement of LCD panels with rigid OLEDs by reducing costs.
In addition, SDC plans to apply the latest technology to new foldable products in 2024, improving panel performance in wrinkles, scratch resistance, power consumption, and more, thereby widening the quality gap with competitors.
In the large-size QD-OLED segment, SDC will increase production capacity without additional investment, dedicated to improving production efficiency, aiming to increase the proportion of sales of high-end products. At the same time, SDC will expand the proportion of IT and automotive displays to diversify its business structure.
