LG & Sharp Profits Hit By Low Demand For Flat-Screen TVs

Vincent Teoh

LG Electronics and Sharp Corporation, two of the world’s largest TV makers, have seen their quarterly profits tumble, primarily due to lacklustre consumer demand amidst the global economic turmoil. Financial analysts broadly expect Samsung, Sony and Panasonic – who make up the rest of the “Big Five” television manufacturers – to report similar woes when they unveil their quarterly results this week.

LG Electronics is the second-biggest TV maker in the world behind Samsung. According to its latest financial results, its Home Entertainment division – which is responsible for developing and selling flat-screen HDTVs – suffered a 46% drop in operating profits to 123 billion Korean won (around £68 million) during the third quarter, in spite of a 9% increase in sales revenue to 5.4 trillion Korean won (around £3 billion) within the same period.

On a more positive note, the company revealed that it shipped 6.6 million units of flat-panel televisions during the third quarter. This number of LG flat-screen TVs sold represents a 37% jump from the same period last year, and is the highest in the company’s history.

Meanwhile, Sharp Corporation saw its quarterly profits from July to September this year dip 24%, prompting the Osaka-based conglomerate to lower its full-year operating profit forecast from 120 billion yen (around £930 million) to 90 billion yen (around £697 million). The revised figure is more in line with market expectations of 94.7 billion yen (around £733 million) as polled by Thomson Reuters among 24 analysts.

Besides sluggish demand for LCD panels, Sharp blamed the strong Japanese yen currency (which recently hit a 15-year high against the US dollar) for diluting its overseas earnings that make up around half of its overall sales revenue. Earlier this year, Sharp had to scale back output at a state-of-the-art LCD panel production plant due to excess inventory, denting the company’s bottom line in the process.

Both LG and Sharp expect the LCD HDTV inventory surplus to continue well into next year, which applies further downward pressure on prices even with the busy Christmas and New Year shopping period fast approaching.