Yesterday, Korea’s LG Display saw fit to update - that is, downgrade - its outlook for the fourth quarter of 2008.

Ken Werner
Senior Analyst and Editor

"Due to the global economic recession, demand for LCD panels has sharply declined and the price of LCD panels has dropped more than expected during the fourth quarter. Given the market situation, LG Display expects the fourth quarter earnings results are not likely to meet the initial guidance. Therefore, the company decided to update the outlook based on currently available information and current market conditions as part of its transparent disclosure practices," the company stated in a press release issued on December 10.

In the release, LG Display presents some interesting, but disheartening forecasts. As you read these forecasts, please recall that in recent months the Korean TFT-LCD makers - LG Display and Samsung - have been running at higher plant utilization rates than their major Taiwanese competitors, thanks in part to being closely coupled to corporate siblings that make consumer electronic and IT products that incorporate their display panels.

Area Shipments. LG Display’s area shipments are expected to increase by a low single digit percentage in Q4 compared to Q3′08, a decline from the initial guidance of a low to mid-teens percentage increase quarter-on-quarter.

Average Selling Price per Square Meter. The ASP per square meter is expected to decline by a percentage in the low 20s quarter-on-quarter, compared to the previous guidance in the high single digits.

Reduction in Cost of Goods Sold (COGS) per Square Meter. The percentage reduction in Q4 is now expected to be in the low teens, compared to the previous guidance in the high single digits.

LG Display CFO James Jeong said, "Due to the demand slowdown resulting from the global economic recession, we have been adjusting the input volume of glass substrates since the third quarter. We expect our factory utilization rate to be about 80% in the fourth quarter. The company has been adjusting the utilization rate with the principle of responding flexibly to market situations. We will continue with such efforts to maintain healthy inventory levels. We expect to surpass our initial COGS reduction guidance in the fourth quarter, however the EBITDA margin is expected to be around the low to mid teens percentage, which is lower than the low twenties percentage initially guided."

The reduced demand cited by Jeong was dramatically demonstrated during the week of Black Friday, when electronics sales at brick-and-mortar stores dropped year-over-year for the first time, according to figures released early this week by NPD. Sales were $2.03B, 8.4% less than in 2007 and even less than in 2006. Black Friday Week sales were better than in 2005, but that did not seem to generate much celebration in the industry.

NPD attributed the economic decline, to a lower level of discounting than in most previous years, to a greater emphasis on online sales, and to the troubles with Circuit City and Tweeter. NPD VP Stephen Bakers said, "As consumers’ shopping options grow, Black Friday may become less of a barometer for the holiday shopping season and more of a showcase of retailers’ holiday intentions."