Apple supplier LG Display seeks to broaden smartphone client base

Credit: Reuters/Rick Wilking

LG Electronics' company logo is displayed at their news conference at the Consumer Electronics Show (CES) in Las Vegas January 7, 2013.

LG, which vies with Samsung Electronics Co Ltd's panel unit for the top position in liquid crystal display flat screens globally, made 366 billion won ($326 million) in operating profit for its April-June second quarter. That beat the average forecast of a 304 billion won profit in a Thomson Reuters poll of analysts.

But sales slipped 5 percent from a year earlier to 6.6 trillion won, missing analysts' expectations for 7.28 trillion won. LG Display said sales fell because weaker demand for screens used in mobile devices and laptops more than offset increases in total panel shipments.

Most of LG Display's mobile screens are sold to Apple Inc, as it is the biggest panel supplier for the U.S. firm's smartphones and tablets, according to analysts.

The South Korean company said it expects overall panel prices to weaken in the current quarter before they start to recover later in the period.

Analysts expect LG Display to enjoy upbeat sales of screens used in mobile devices in the current quarter as Apple and LG Electronics Inc are planning to launch new mobile products.

Apple is exploring launching iPhones with bigger screens, as well as less-expensive models in a range of colors, over the next year, according to people with knowledge of the matter.

But some analysts warn that profit margins could be squeezed if Apple does introduce low-end models, while sales of premium televisions using ultra high definition screens as well as organic light-emitting diode panels remain extremely weak.

A weak global market for televisions, the biggest source of LG Display's revenue, is also expected to pressure its earnings growth, analysts say.

Daiwa Capital Markets this month cut its 2013 global LCD TV shipment growth forecast to 2.2 percent from 4.2 percent. It now expects global PC shipments, another source of major flat-screen sales, will shrink 8.8 percent this year, sharper than its previous forecast for a 4.3 percent drop.

Shares in LG Display have dropped 12 percent over the past three months, lagging a 5.6 percent drop in the broader market. The stock closed down 3.1 percent prior to the earnings announcement.

(Reporting by Miyoung Kim and Hyunjoo Jin; Editing by Chris Gallagher)