Suzhou, Shenzhen Candidates; Plan Follows LG Display’s Move
By Kim Yoo-chul
Staff Reporter
Samsung Electronics, the world's biggest producer of liquid crystal display (LCD) panels, plans to build a 4-trillion-won or $3.2-billion LCD panel plant in China to meet growing demand for large-sized televisions from the world's fastest growing major economy.
The plant will use an advanced eighth-generation LCD technology, which is optimized to cut 50-inch-level LCD panels diagonally. An LCD panel is a key component accounting for half the cost to produce an LCD TV.
The facility is set to begin operation sometime in the latter half of 2011, at the earliest, while the Suwon, Gyeonggi Province-based technology giant is in the final stages of deciding on the location of the factory, according to high-ranking industry and Samsung sources.
"Samsung will build an eighth-generation LCD facility in China that could cost over $3 billion. Production timing is being set from the fourth quarter of 2011. The decision came after Samsung's top decision makers reached a consensus for the needs of a drastic measure to eat up more shares in China's TV panel market," a high-ranking industry source told The Korea Times, Wednesday.
Samsung officials and industry watchers said that Samsung will not bring in a strategic partner for the project.
Suzhou, a major city in Jiangsu Province, or Shenzhen City in Guangdong Province are the candidates for the plant.
A panel plant in China would be the first for Samsung. It runs two LCD module plants, one in Suzhou, southeastern China, and one in Tianjin, near Beijing, in which the company assembles panels for notebook PCs and monitors.
"Although the deal is subject to approval by the Korean government and Samsung's board, Samsung is positive about receiving a green-light both from the board and the government as the eight-generation technology will prove to be old after two years," another industry source said.
Seoul has the option of blocking the transfer of technologies deemed as strategic.
A Samsung spokesman said the company is studying the possible effects of the plant construction.
The plan came a day after Chang Won-kie, president of Samsung's LCD business, said the company has interests in building a factory in China as the Chinese market is expected to grow.
Samsung's biggest hometown rival, LG Display, has already signed a non-binding preliminary agreement with the city of Guangzhou to build an eighth-generation LCD factory.
Analysts say the moves by Korean LCD makers would be important landmarks for the industry in China but would also be a big threat to Taiwanese panel makers, as Samsung and LG are already ahead in panel production.
China; Big Money
On the back of Beijing's subsidies for electronics purchases in rural areas, China's LCD TV market is growing. Market research firm DisplaySearch expects the number of LCD TVs to be sold in China to jump 76 percent to 23.6 million this year.
Beijing announced that plans to pay $2.9 billion in subsidies this year for home-appliance purchases in rural areas helped boost demand for TVs in China.
Analysts interpret Samsung's decision as natural and persuasive, considering the further growth potential in China.
Beijing is also giving incentives, including subsidies and land rights for foreign LCD makers, to build an advanced LCD factory in the country to revive the stalling flat-panel industry.
Currently, China's most advanced display plant is a sixth-generation factory being built by BOE Technology Group, a technology that Samsung and LG began using commercially five years ago.
"China will become the single largest LCD market in the world after 2011. Meanwhile, the recovery sign is seen in the global LCD industry as production cutbacks eased oversupply woes," said Park Hyun, an analyst at Prudential Investment.
Samsung's first panel plant in China also means a strategic change and revised outlook for oversupply worries.
Last year, Samsung's top officials had scrapped the panel construction plan in China due to managerial risks.
The company built its second LCD module plant in Suzhou with an investment of some $150 million.
Continued demand and supply imbalance for panels in TV use had forced them to take a conservative initial step, at that time.
"The situation has been changed. As far as I know, Samsung plans to put more focus on producing high-end gadgets with next-generation panels such as AM OLED or flexible display. It plans to increase production in China to improve efficiency by shifting labor-intensive work to that country and for bigger stakes in the booming market, there," the high-ranking industry officer said.
But Samsung might face challenges to continue the rising momentum in China as its biggest rival LG Display has steadily been strengthening its client base by sealing a partnership with China's leading local TV brands including Skyworth and Konka.
yckim@koreatimes.co.kr
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