LG.Philips scraps 5.5-gen plant, may go bigger

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South Korean flat-screen maker LG.Philips LCD on Monday officially scrapped a 550 billion won ($593 million) investment in a planned panel production line, opening the way to a larger investment later this year.

LG.Philips LCD Co. Ltd., the world's No. 2 maker of large-sized LCD panels, on Friday said it would abandon plans for a "5.5th generation" screen plant designed for both TV and monitor/notebook panels.

Instead, LG.Philips said Friday, "the company will soon make a decision on a next-generation investment, for mass production in 2009."

The announcement opens the way for a possible investment in a larger "eighth-generation" LCD production line which would enable LG.Philips to enter the coveted 50-inch-plus panel market, which is expected to soon become the next industry standard.

Market reaction to the double announcement was mixed on Monday, with LG.Philips shares rising 0.41 percent to 37,100 won at 0152 GMT, trailing the KOSPI's 1.4 percent rise, after initially dropping almost 2 percent.

"The cancellation of the 5.5 line implies a new line, and a new fundraising effort," said James Kim, an analyst for Lehman Brothers, who thinks the company will need to raise about 1 trillion won to build the estimated 3 trillion won facility.

"Losses will be inevitable with the new line, for the first year at least," Kim said. "LG.Philips has to be very cautious with this investment."

Helped by falling prices, LCD TVs have increased their share in the popular 40-inch-and-larger TV market, winning a cut-throat price war against the competing plasma display technology.

Plasma makers still have an advantage in the 50-inch-and-bigger category, but LCD makers are trying hard to catch up. Japan's Sharp Corp. and Samsung, partnering with Sony Corp., already have eighth-generation LCDlines.

LG.Philips, competing with Samsung and Taiwan's AU Optronics Corp., reported its fourth consecutive quarterly loss in the January-March quarter but expects to turn around to a profit during the current quarter.

"IT panel prices have been very strong in May, and TV panel price falls have slowed down" said Jae H. Lee of Daiwa Securities. "We now expect LG.Philips to post a profit in the second quarter.