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LGD plant accident and outlook -4

08:59 28-Jun-17


As I implied at the end of last month, LPL shares have continued to run, nearing $17 yesterday and two weeks before that.  That's been perfect for working out of my long positions, and I now suspect that the run is almost over with sad news this morning of another death on the 8.5G production line and its closure.  That closure is expected to last 2-4 weeks.  The last time something like this happened, the duration was towards the shorter end of that range, but a changing Korean government might take a different approach this time around.

Some are seeing political change in Korea as opportunity, but I think it is too little, too late.  China's AMOLED screen capacity is set to double each year for the next 3 years, rising to more than half of Korea's planned production, even with LGD focusing all of its new capacity on AMOLEDs.  The ramp in China is no longer just rumor and press releases, with plant construction now in progress.  Korea's historical quality lead is also eroding faster than estimated, with Japanese providers now beginning to supply high resolution equipment to Chinese producers. 

Behind all this is unrivaled Chinese government backing, and consensus on the viewpoint that I began offering over 3 years ago, that AMOLEDs would take over the display industry.  Japan continues to plan its next-gen efforts as well, though even that now has Chinese ties.  All of this makes me skeptical of press regarding American production prospects, again with Chinese backing.  China is famous for its horrid working conditions, and LGD's recent news and history indicate that even if such jobs were to come the U.S., they wouldn't be good ones.