Samsung Electronics, the world's largest maker of flat panels, said it will spin off its unprofitable liquid-crystal-display division as it focuses on making thinner, brighter televisions.
The new company, provisionally named Samsung Display, will be set up on April 1 with paid-in capital of 750 billion won ($800 million), Samsung said.
Samsung's LCD business had an operating loss of 750 billion won last year as global TV sales slowed.
The spinoff company may eventually merge with the Samsung Mobile Display venture which makes organic light-emitting diode (OLED) panels, as Samsung prepares to meet growing demand, said James Song, an analyst at Daewoo Securities.
"It's a good decision for Samsung Electronics," Song said.
"The long-term direction for their display business is going OLED. They can improve efficiency of investment by combining similar businesses."
Samsung is reviewing an eventual merger of its LCD and OLED operations, Nam Ki Yung, a Seoul-based spokesman, said by phone.
While OLED displays are mostly used in mobile devices, the Suwon, South Korea-based company and competitor LG Electronics are looking to use the technology in televisions and may start selling sets this year. The new models can be wafer thin and produce richer colours than LCD sets.
The OLED market may grow to more than US$20 billion ($24 billion) by 2018, accounting for about 16 per cent of the total panel market, from an estimated US$4 billion, or 4 per cent of industry-wide revenue, last year, according to California-based DisplaySearch.
Samsung plans to spend 6.6 trillion won on its display business this year, the company said last month. Investment in the OLED business will probably amount to about 5 trillion won this year, Song said.