Executive Summary / Key Takeaways

• Strategic OLED Pivot Driving Profitability: LG Display is undergoing a profound business transformation, divesting from its less competitive LCD TV segment to focus intensely on advanced Organic Light-Emitting Diode (OLED) technologies across mobile, IT, large panel, and automotive displays. This strategic shift is already yielding tangible results, with the company achieving a significant year-over-year improvement in operating results and a commitment to full-year profitability in 2025.
• Technological Leadership and Innovation: The company maintains a competitive edge through differentiated OLED technologies, including Tandem OLED for IT and automotive, and has achieved a world-first in verifying commercialization-level blue phosphorescent OLED panels, a critical step towards "dream OLED" displays. Strategic investments totaling KRW 1.260 trillion are bolstering capabilities in LTPO 3.0, COE, and multi-stack AMOLED structures.
• Improving Financial Health and Operational Efficiency: Despite macroeconomic headwinds, LG Display has significantly improved its financial structure, achieving its KRW 13 trillion debt reduction target ahead of schedule. Enhanced operational efficiency and cost innovation are contributing to sustained EBITDA margins and a positive net income in Q2 2025, partly driven by the sale of the Guangzhou LCD plant.
• Strong Growth in High-Value Segments: High-growth segments like automotive displays are projected to triple OLED revenue in three years, while large-sized OLED panel shipments (including monitors) are expected to increase to the mid-6 million range in 2025. The small panel mobile segment also anticipates outperforming previous year's full-year performance.
• Outlook for H2 2025 and Beyond: Management anticipates a steep rebound in performance in the second half of 2025, driven by expanded OLED businesses and higher ASPs. While external uncertainties and tariff issues persist, LG Display's focus on high-end, differentiated products and strong customer partnerships positions it for continued growth and profitability.

The OLED Imperative: Reshaping LG Display's Future

LG Display Co., Ltd. (NASDAQ:LPL) stands at a pivotal juncture, strategically reorienting its vast display manufacturing capabilities towards a future dominated by Organic Light-Emitting Diode (OLED) technology. Incorporated in 1985 as LG.Philips LCD Co., Ltd. and later rebranded in 2008, the company has a rich history in thin-film transistor liquid crystal display (TFT-LCD) panels. However, recognizing the evolving competitive landscape and the superior attributes of OLED, LG Display has embarked on an aggressive transformation, shedding its less competitive LCD businesses to sharpen its focus on high-value OLED segments. This strategic pivot is not merely a shift in product mix but a fundamental re-engineering of its business model, designed to capture growth in premium markets and enhance long-term profitability.

The display industry itself is dynamic, characterized by intense competition, rapid technological advancements, and fluctuating demand influenced by global economic cycles. While the TV set market is expected to contract compared to earlier outlooks, the IT set and panel market, particularly at the low end, shows signs of slight recovery. Factors such as the termination of Windows 10 support and the rise of AI-based PCs are anticipated to trigger replacement demand, creating opportunities for display manufacturers. In this environment, LG Display's commitment to OLED is its strategic anchor, aiming to leverage its technological prowess to differentiate and lead.

Technological Edge: The Core of LG Display's Strategy

At the heart of LG Display's investment thesis lies its differentiated OLED technology, which forms a critical competitive moat against rivals. The company's Tandem OLED technology is a cornerstone, offering significant advantages in low power consumption, extended lifespan, and high luminance. These attributes are particularly crucial for demanding applications in IT devices and automotive displays, where performance and durability are paramount.

A groundbreaking achievement underscores LG Display's innovation leadership: the company has become the world's first to successfully verify the commercialization-level performance of blue phosphorescent OLED panels on a mass production line. This milestone, achieved in partnership with UDC (OLED), is a significant step towards realizing a "dream OLED" display, which would achieve phosphorescence for all three primary colors. The hybrid two-stack Tandem OLED structure, combining blue fluorescence in the lower stack with blue phosphorescence in the upper stack, consumes approximately 15% less power while maintaining similar stability to existing OLED panels. This quantifiable benefit directly translates into more energy-efficient and longer-lasting devices, a compelling value proposition for consumers and manufacturers alike.

Further solidifying its technological lead, LG Display announced a substantial investment of KRW 1.260 trillion (approximately $917 million - $925 million USD) in June 2025 for new OLED technology preparation, to be executed over two years until the first half of 2027. This investment is strategically allocated to expand infrastructure and increase production capacity for advanced OLED technologies, primarily at its Paju campus in South Korea. Specific initiatives include upgrading LTPO technology to LTPO 3.0, implementing COE (Color on Encapsulation) technology for polarizer-free OLEDs, enhancing its 2-stack tandem AMOLED structure, and adding new chambers for 4-stack WOLED production. An additional $412 million will be invested in LG Display's Vietnam-based OLED module factory to improve process efficiency and automation. These R&D efforts are designed to maintain a technological gap with competitors and enhance product competitiveness, ultimately driving higher average selling prices (ASPs) and better margins.

Competitive Landscape and Strategic Positioning

The display panel industry is characterized by intense competition from global players such as Samsung Display (SSNLF), BOE Technology (BOEHY), AU Optronics (AUO), and Sharp (SHCAY). LG Display's strategic shift to an OLED-centric model is a direct response to the diminishing competitive advantage in the commoditized LCD market. While precise, directly comparable market share figures for all niche competitors are not publicly detailed, LG Display's focus on high-end, differentiated OLED products is its primary strategy to gain and maintain market leadership.

Against Samsung Display, a formidable innovator with strong vertical integration, LG Display counters with its focus on cost-effective scalability in OLED and a broad global footprint, particularly in automotive and large-panel segments. Samsung's advanced R&D capabilities pose a continuous challenge, but LG Display's recent blue phosphorescent OLED breakthrough demonstrates its commitment to pushing technological boundaries. In comparison to BOE Technology, which benefits from large-scale manufacturing and cost advantages, LG Display emphasizes superior quality and reliability, particularly in established markets, fostering stronger customer loyalty. While BOE may capture more market share in price-sensitive areas, LG Display aims for higher value segments.

LG Display's offerings in TFT-LCD and OLED panels are competitive in quality and application versatility. The company leverages differentiated high-end LCD technologies like IPS Black and next-generation oxide for its IT LCD segment, strengthening partnerships with global top-tier B2B customers. This strategy allows LG Display to compete effectively in segments where its technological strengths provide a clear advantage, rather than engaging in a race to the bottom on price. The company's strong relationships with global top-tier customers, including European premium automotive companies and global EV makers, are crucial for securing orders and expanding its high-value product portfolio.

Financial Performance and Operational Momentum

LG Display's financial performance in recent quarters reflects the early successes of its strategic transformation, albeit amidst persistent macroeconomic uncertainties. In the second quarter of 2025, the company reported sales of KRW 5.587 trillion, an 8% quarter-over-quarter decline and a 17% year-over-year decline, primarily due to the seasonal off-peak for smartphones and the termination of the LCD TV business. Despite this, the operating loss of KRW 116 billion in Q2 2025 represented a significant improvement compared to previous periods, driven by ongoing efforts to upgrade the business structure to an OLED-centered model, reduce costs, and enhance operational efficiency.

A notable highlight was the net income turning positive to KRW 890.8 billion in Q2 2025, largely due to improved foreign exchange gains and the gain on the sale of the Guangzhou LCD plant. The company's EBITDA for Q2 2025 stood at KRW 1.539 trillion, with an EBITDA margin of approximately 19%, maintaining a mid-teen margin for the seventh consecutive quarter. This demonstrates consistent operational cash generation despite the revenue fluctuations. The average selling price (ASP) per square meter saw a substantial 32% quarter-over-quarter increase to $1,056 in Q2 2025, a direct consequence of exiting the low-ASP LCD TV business and shifting towards higher-value OLED products. The OLED portion of total revenue reached 56% in Q2 2025, continuing its steady growth.

Looking back, Q1 2025 saw a solid revenue of KRW 6,065.3 billion, a 15% year-over-year increase, and an operating profit of KRW 33.5 billion, marking the first Q1 profit in eight years (excluding the COVID period). This represented a significant improvement of KRW 509.2 billion year-over-year. For the full year 2024, LG Display reported an annual revenue of KRW 26.6 trillion and an operating loss of KRW 560.6 billion, a substantial reduction of approximately KRW 2 trillion year-over-year. These financial improvements underscore the effectiveness of the OLED-centric structural upgrades and rigorous cost innovation activities.

Strengthening Financial Structure and Future Outlook

LG Display has made significant strides in improving its financial health. At the end of Q2 2025, cash and cash equivalents amounted to KRW 1.666 trillion. The company has already achieved its total debt reduction target of KRW 13 trillion, set at the end of last year, ahead of schedule. The debt ratio decreased to 268% and the net debt-to-equity ratio to 155% at the end of Q2 2025, representing significant quarter-over-quarter reductions. The proceeds from the sale of the Guangzhou LCD TV plant are being strategically utilized to further improve financial standing and fund future investments in the OLED business.

For the third quarter of 2025, LG Display expects shipment area to decline by a low to mid-single-digit percentage due to product mix changes and a reduction in low-margin medium panel products. However, ASP per area is forecast to increase to mid-20% levels, driven by a seasonal increase in shipments of small- and medium-sized OLED products. Management anticipates a "steep rebound in performance in the second half" of 2025, with broader profit improvements across both large and small and medium OLED panel businesses. The company has committed to achieving a full-year profit turnaround for 2025, with first-half performance already exceeding initial expectations.

Capital expenditure (CapEx) for 2025 is expected to be in the low KRW 2 trillion range, similar to last year, with new investments prioritizing profitability and maximizing the use of existing infrastructure. This conservative yet strategic investment approach ensures that resources are directed towards high-growth, high-margin OLED opportunities, such as the KRW 1.260 trillion investment in new OLED technology.

Risks and Challenges

Despite the positive momentum, LG Display faces several risks and challenges. Ongoing macroeconomic uncertainties and volatility in the global trade environment, including tariff-related issues, could impact demand and supply chains. While management believes there are no critical supply chain issues or direct price pressures from tariffs currently, the situation remains fluid. The sluggish global IT market continues to pose a challenge, particularly for high-end product sales, and the EV market growth has also dampened, introducing volatility in the automotive segment.

Competition remains fierce across all segments, necessitating continuous innovation and cost efficiency. LG Display's ability to maintain its technological gap with competitors and effectively respond to market shifts will be crucial. The company's strategy of reducing low-margin products and focusing on top-tier customers helps mitigate some of these risks, but sustained execution is paramount.

Conclusion

LG Display is in the midst of a transformative journey, strategically pivoting its business towards a future powered by advanced OLED technology. By divesting from its legacy LCD operations and making significant investments in next-generation OLED, the company is not only enhancing its technological leadership but also fundamentally reshaping its financial profile. The tangible improvements in profitability, robust cash flow generation, and proactive debt reduction efforts underscore the effectiveness of this strategic reorientation.

The commitment to a full-year profit turnaround in 2025, coupled with strong growth projections in high-value segments like automotive and IT OLED, paints a compelling picture for investors. While external uncertainties and competitive pressures persist, LG Display's differentiated technology, strong customer relationships, and disciplined operational strategies position it favorably to capitalize on the expanding opportunities in the premium display market. The successful commercialization of blue phosphorescent OLED panels and ongoing investments in advanced structures like Tandem OLED are critical enablers for sustained competitive advantage and long-term value creation.