LG Electronics Inc, South Korea's second-largest electronics maker, plans to take a 380 billion won (US$319 million) charge as consumers abandon cathode-ray tube televisions and computer monitors for flat-panel models.
The fourth-quarter charge at unit LG Philips Displays, the world's largest cathode-ray tube maker, reflects a "sudden decline in demand," Seoul-based LG Electronics said in a statement. The venture with Royal Philips Electronics NV is headed by chairman Andreas Wente.
The loss underscores the speed at which traditional TVs and monitors are being replaced by newer technologies such as liquid-crystal displays. LG Electronics has been closing cathode-ray tube factories and channeling investment to production of LCDs, a market that's forecast to increase 13-fold by 2007, including the two companies' flat-panel venture, LG Philips LCD Co.
"We knew the company may have to reflect losses from its cathode-ray tube business, but this is double what we expected," said Nam Jung Sik, who manages the equivalent of US$210 million at CJ Investment Trust Management Co in Seoul.
The 380 billion won charge is higher than any quarterly profit that LG Electronics has posted since being spun off as a new company in April last year. In the third quarter, LG Electronics' net income doubled from a year earlier to 224 billion won.
LG Philips Displays had a 660 billion won loss last year.
LG's flat-panel venture had a 289 billion won profit, regulatory filings show. Koo Bon Jun, a founding family member of the LG Group, Korea's second-largest industrial group, runs LG Philips LCD.
Demand for cathode-ray tubes will fall 15 percent this year to 70 million units, LG Philips Displays Chairman Wente said in March. About 40 percent of computers sold worldwide may use glass-tube displays by 2006, down from 60 percent this year, LG Philips Displays has said.
So far, the trend has helped LG Electronics. The company's third-quarter profit increase was due mainly to gains at its flat-panel business.
Sales doubled and profit quadrupled at LG Philips LCD in the three months ended Sept. 30, LG Electronics said.
LG Electronics and other electronics units of LG Group raised next year's research and development spending budget by 17 percent to 2.1 trillion won in October, with two-thirds of that amount marked for products such as LCD and plasma TVs, LG Group said.
LG Philips LCD was the second-largest maker of the flat-panel screens last year behind South Korean rival Samsung Electronics Co. LCD sales will increase 40 percent next year, Samsung Electronics forecast last month.
Samsung, LG.Philips and Taiwan producers such as AU Optronics Corp (
Other makers of traditional TVs are scaling down their operations. Sony Corp, the world's second-biggest consumer electronics maker, said in October that it will close down its cathode-ray tube plants in Japan as part of plans to save ?330 billion (US$3 billion) by the year ending 2007.
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