South Korean flat screen maker LG Display Co (034220.KS: Quote, Profile, Research) and two smaller Taiwanese rivals are set to post profits for the second quarter that more than trebled thanks to strong demand for TVs and tight supplies of PC panels.
But a global economic slowdown that threatens to depress consumer spending and falling prices of liquid crystal display panels will slow growth in the coming quarters.
"Earnings have peaked in the second quarter," said James Kim, an analyst at Lehman Brothers. "Demand to replace TVs with flat-screen models is still there, but fewer consumers are buying large-size TVs because of the weak economy."
Analysts had widely expected a downturn to hit the sector at the end of the year, but they say that slowdown could come sooner and lead to a longer-than-expected slump.
Taiwan's top LCD makers, AU Optronics Corp (2409.TW: Quote, Profile, Research) and Chi Mei Optoelectronics Corp (3009.TW: Quote, Profile, Research), are considering cutting output to stabilize prices, the Commercial Times reported this week.
Drastic investment cuts last year helped the LCD industry enjoy strong earnings in the first half of this year, as tight supply kept pricing stable at a time when sales are usually slow.
But demand from the United States and Europe has slowed due to the weakening economy, although smaller sizes remain popular in emerging markets such as China.
And even in China, recent disasters such as heavy winter snow and the May earthquake have hurt sales and disappointed some who had expected the entire nation to snap up sleek LCD TVs ahead of the Beijing Olympics.
LG Display (LPL.N: Quote, Profile, Research), the world's second-biggest LCD panel maker, is forecast to report next Wednesday a 752 billion won ($725 million) net profit in the second quarter to June 30, according to 10 analysts surveyed by Reuters.
That would mark a sharp increase from 228 billion won earned in the year-earlier period and higher than 717 billion won in the first quarter.
Second-quarter sales are expected to come in at 4.38 trillion won, up from 3.36 trillion won a year earlier, according to Reuters Estimates.
