LG Electronics plans to cut back production of PDP (plasma display panel) screens as part of it efforts to improve the business performance of its display operations.

The company will close the oldest of its three PDP manufacturing lines but won't ramp-up production on its other two lines to compensate. As a result, monthly capacity will drop from 430,000 panels to 360,000 panels. The cut back is expected to result in savings of between $22m and $32m per year.

Behind the move are falling prices in the display market as a result of fierce competition.

Until a few years ago, the market was neatly divided between PDP and the rival LCD (liquid crystal display) technology. LCD panels were used in displays and televisions up to about 42in in size and PDP took over from there. However, advances in LCD manufacturing technology in recent years have made larger size LCD panels more cost effective. There's now fierce competition in the entire middle range of the market where the two overlap, and PDP appears to be losing.

In the first quarter of this year, shipments of PDP panels fell 1 percent compared to the same period last year - the first time the industry has seen a year-on-year decline, according to DisplaySearch. The market research company attributed the drop to a loss of market share to LCDs at screen sizes over 37in.

Total PDP shipments in the first quarter were 2.3 million, DisplaySearch said.