LG Display told Nikkei Asia it would spend $750 million to expand its Vietnamese organic light-emitting diode (OLED) production capacity. The firm maintains a manufacturing facility in the city of Hai Phong to fabricate TV panels and smartphone screens. It plans to upgrade the complex from March through May 2021.
Local government officials noted the project would bring 5,000 new jobs to the area. To date, the corporation has invested $3.25 billion in the Southeast Asian country.
The vendor’s capital expenditure will let it better serve electronic device companies, including large clients like Apple.
Why LG Display is Building Out its Vietnamese Production Capacity
Although LG Display maintains production hubs in South Korea and China, the firm will derive many benefits from expanding its presence in Vietnam.
Most prominently, the company will not have to pay large tariffs to move its electronics components out of the region. Because of the U.S.-China trade war, it needs to include various levies into its calculations when moving parts between either nation. By making its goods in Hai Phong, it will avoid the costs associated with the conflict.
In addition, Vietnam’s robust manufacturing ecosystem and affordable labor pool make it an ideal place for production capacity build-out. It moved its smartphone assembly operations from South Korea to the country in 2019 as a cost-saving measure. Its decision to expand its presence in the Southeast Asian country follows the same logic.
It is also worth noting reports recently emerged that LG is contemplating an exit from the handset marketplace. Though once a leading player in the space, it lost its place to vendors that offered more innovative and less expensive hardware. If the conglomerate does leave the field, making its display business more cost-effective would be a smart move.
Increasing Production Capacity and Competitive Capability
LG Display’s Vietnamese manufacturing complex upgrade will also make the company a more competitive vendor.
The part marker scored a major victory last year when it landed a contract to produce OLED screens for the iPhone 12. Apple typically tasks Samsung with fabricating its current generation smartphone panels. However, it called in the South Korean firm to support its latest handset refresh. The Big Tech giant hired the provider to make 20 million touch user interfaces for its flagship mobile devices.
LG Display’s new business with Apple is vital to its future. For one thing, the massive iPhone 12 helped drive its revenue to double-digit growth in the second half of 2020. It also allowed the subsidiary to quickly bounce back from losing its position as the California corporation’s liquid crystal display (LCD) supplier.
Going forward, the company can make a more compelling case for Apple to expand their partnership. Its ability to offer significant production capacity in a trade war neutral territory will make its services more appealing. Its enhanced capabilities will make it especially enticing given the electronic giant’s problems sourcing parts for the iPhone 12.
Regardless, LG Display’s strategic manufacturing capability enhancement is a shrewd move that will pay major dividends in the future.