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LG Electronics is under pressure to decide whether to halt its Plasma Display Panel (PDP) TV production, which is currently suffering from chronic deficit. Some experts have raised the prospect that LG will either sell the PDP business to another company or carry out restructuring.

An official with LG Electronics said on April 9 that it is going to make a decision late this month or early next month, as the company has been receiving advice on the PDP business from management consulting firm McKinsey & Co. for the past three months. Following this consultation, LG is anticipated to correct its overall management strategies for its PDP TV business, which posted a record deficit last year. Due to falling PDP prices, LG's Digital Display (DD) business posted a 146.7 billion won (US$156.4 million) operating loss during the fourth quarter last year.

The sale price of a 50-inch PDP nearly halved to US$1,123 in just two years. As PDP TVs continue to lose ground to Liquid Crystal Display (LCD) TVs in the market, the outlook for the industry is gloomy. Philips has recently ceased PDP production in regions except for North America and Australia in order to concentrate on LCD TVs. LG also has felt a burden due to price competition with the PDP models put out by Japanese rival Matsushita Electric Works, Ltd. Samsung's PDP branch, SDI, is undergoing a managerial efficiency evaluation following a drop in operational profit of more than 80 percent in 2006 from the previous year.

LG said that it has been receiving consultation from McKinsey and Co. to improve the efficiency of its operations, not to sell or halt its PDP business. However, the market predicts that LG will start to modify its strategies based on the consultation results. Prices of LG Electronics shares have risen about 8 percent for the past month from anticipation for restructuring of the PDP business.

Regarding this rise in stock price, Lee Seung-hyeok, an analyst at Woori Investment & Securities, mentioned the restructuring that is being pushed ahead with by Nam Yong, LG's new CEO, and also mentioned the possibility of LG getting rid of its PDP business altogether. However, considering the competitive power of larger than 50-inch PDP TVs in the market and LG's huge initial investment in the project, the possibility of an overall withdrawal is low, according to experts.

LG Electronics began its PDP TV business in 2001 and currently operates three plants in Europe and another three in China. A major LG presentation for investors, which will be held on April 19 and participated in by CEO Nam, is expected to be a turning point to decide the future of the PDP TV business for LG.

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