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Samsung might spin off LCD business

South Korean electronics giant Samsung confirmed to Reuters today that it is considering options to make its LCD manufacturing business more competitive, although it declined to comment specifically on recent reports Samsung is considering spinning the operation off into a separate company.

South Korea’s Samsung and LG Electronics are the two top makers of LCD displays. Nonetheless, Samsung’s LCD manufacturing operations lost more than 1 trillion won (about US$890 million) during 2011. The statement to Reuters follows reports in Korea’s Chosun Ilbo saying that Samsung is mulling a spinoff of the business.

The news might seem improbable: after all, LCD displays are in everything from mobile phones to tablets to vehicles to computers to televisions—surely there must be a bundle of money to make in the business? However, LCD manufacturers face enormous costs to get manufacturing operations up and running, which makes them reluctant to invest in new facilities unless there’s a strong demand for the product. Right now, South Korean LCD manufacturers like Samsung and LG are seeing strong pricing pressures from new LCD manufacturers in China—couple that with sluggish global demand for televisions, and it’s hard to make a case that building LCDs is a profitable enterprise in Korea. Japan has already seen substantial government-assisted consolidation in its LCD manufacturing industry due to competition from Korea, Taiwan, and (now) China.

Earlier this month, Samsung indicated it may take over its subsidiary that manufactures OLED displays for mobile devices. Increasingly, flat-screen manufacturers are looking at OLED (organic light-emitting diode) as the next technology to power large-screen displays like televisions. Besides spinning off its LCD business, Samsung could be considering converting portions of its capacity to making OLED displays.

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