Samsung Display to Invest $3.6 Billion in New OLED Production Line

South Korea's Samsung Display plans to invest 4 trillion KRW ($3.6 billion, roughly Rs. 22,430 crores) into making organic light-emitting diode (OLED) panels as its parent Samsung Electronics Co Ltd looks to boost components sales to offset weaker smartphone earnings.

A Samsung Display spokesman told Reuters on Wednesday the investment will take place from 2015 to 2017 for a new production line that will make medium and small-sized OLED displays for consumer electronics devices like smartphones.

Analysts and investors say Samsung Electronics will need to rely on its component sales to generate earnings growth this year as sales for the erstwhile cash cow smartphone business decline. The chips and displays businesses are trying to acquire more external customers to grow sales.

Recent data shows that arch rival Apple caught up to or surpassed Samsung as the world's top smartphone maker in the fourth quarter.

(Also see: Apple Ties With Samsung as World's Top Smartphone Vendor: Report)

Samsung Electronics invests heavily in its components businesses on an annual basis. Of 23.4 trillion KRW in capital expenditures last year, 14.3 trillion KRW was for the semiconductor business while another 4 trillion KRW  went to displays.

In addition to the planned OLED investment, Samsung is expected to start building a 15.6 trillion KRW chip plant in South Korea sometime in the first half of the year. The company said in October that construction for this plant will be completed in the second half of 2017.

Such investment requirements could act as a constraint in Samsung's capital returns. A person with direct knowledge of the matter told Reuters on Tuesday that the company's total 2015 dividend payout will likely fall from 2014.

South Korea's Yonhap News Agency separately reported on Wednesday that LG Display Co Ltd plans to invest between 1 trillion KRW and 1.2 trillion KRW this year to add capacity in an existing large-panel OLED production line. LG Display declined to comment.

© Thomson Reuters 2015