Samsung Announces LCD "Spinoff"

In February 2012, Samsung Electronics announced that its board had agreed to create a new and separate business entity based on the company's liquid-crystal-display (LCD) business. According to Samsung's announcement, factors spurring the move included rapid changes in the display market and the likelihood of OLEDs overtaking LCDs, as well as Samsung's desire to streamline decision-making and manage resources more efficiently.

Although the term "spinoff," used by Samsung in its announcement, often describes the creation of an independent company, the new Samsung entity, titled Samsung Display Co., will be a wholly owned subsidiary of Samsung Electronics. Among further measures under consideration, also stated in the Samsung announcement, is a merger with Samsung Mobile Display, which currently makes OLEDs and smaller devices. On March 15, shareholders approved the new company, with Samsung executive Dong-gun Park named to lead the firm as president, and initial funding of $848 million.

Samsung Electronics is currently the world's largest maker of flat panels, memory chips, and flat-screen televisions. For two reasons, a move of this kind is not unexpected, says Paul Semenza, analyst with market research firm DisplaySearch. "All LCD makers have been struggling, with six quarters of losses," he says. Most of these companies, he notes, are bound to be at least considering restructuring and cost-savings. The second reason involves the company's two-entity approach toward displays, with Samsung Electronics making large-area LCDs and Samsung Mobile Display making OLEDs and smaller devices. "This could be the first step toward some kind of consolidation," he says.

Consolidation does seem likely. LCD makers have been challenged in terms of profits over the last year and a half, and some experts are predicting that OLEDs will replace LCDs as the dominant display technology. Although it seems unlikely that Samsung is moving away from LCDs, particularly as it has a substantial investment in fabs across the world, combining the LCD and OLED divisions should allow the company to maximize the use of its resources and be ready to respond to market momentum in either direction.