Samsung Electronics will spin off its liquid crystal display division into a wholly owned subsidiary, dumping an unprofitable segment as the company shifts its focus towards thinner displays.
Amid this structural change of the display industry, adopting measures for change and innovation, including business restructuring, are essential to improve our competiveness for our display business, the Seoul-based company said Monday in a regulatory filing.
The LCD business cost the company $666 million in operating losses last year.
Samsung said the next generation of flat-panel technology, called organic light emitting diodes, or OLED, will provide a new wave of profitability after a glut of LCD displays drove down prices last year. The company ended a joint venture with Sony last year that made LCDs for televisions.
Samsung Mobile Display, which may eventually be home to the LCD spin-off, leads the global market for OLED displays, with over 95 percent of market share.
(Shifting to OLED) is an inevitable trend now, said HI Investment & Securities analyst Song Myung-sub, according to Marketwatch. There's no reason for Samsung to pour in more investment into its LCD business and it would rather focus on raising its OLED technology.
The shift to the high-margin OLED market represents a logical shift for the world's largest TV maker. LCD TV sales are expected to contract by eight percent by 2015, according to DisplaySearch, a flat panel industry research company, while the prevalence of OLED displays will grow beyond its current stronghold on the mobile market.
It's a good decision for Samsung Electronics, Seoul- based analyst James Song told Bloomberg. The long-term direction for their display business is going OLED. They can improve efficiency of investment by combining similar businesses.