By Kim Yoo-chul
Staff Reporter

Samsung Electronics and LG Display, the world's two largest flat-screen makers, have downplayed the effects of the merger of Taiwan's two major LCD players on the global market.

Company officials and analysts say the combination of Chi Mei Optoelectronics (CMO) and Innolux Display will not threaten the South Korean leadership in the global LCD market.

But there is the possibility that the panel industry might face an oversupply earlier than expected as the merged Taiwanese entity is planning to boost flat-screen production in 2010, according to market analysts.

"Samsung sees the merger as a breakthrough to normalize the internal supply and demand cycle. It seems difficult for it to rapidly boost the production capacity in a short period," a Samsung spokesman told The Korea Times, Monday.

"We are monitoring the situation. But it won't drag down our market share in the short term," an LG Display spokesman said.

According to data from market research firm DisplaySearch, Samsung is the industry leader with a global share of 27.8 percent in the second quarter, followed by LG Display with 25.0 percent. The market share of the merged Taiwanese firm is around 17 percent.

Last week, Taiwan's flat-panel monitor maker Innolux Display, which is an affiliate of electronic manufacturing service (EMS) provider Foxconn Group, said it has decided to acquire Taiwan's No. 2 LCD panel maker in a bid to better compete with the South Korean companies.

Taiwanese LCD makers are still struggling to recover from the huge sums of money they lost during previous quarters as they were hit by the recession and the industry downturn.

DisplaySearch said the Chimei Innolux Corporation is expected to become No. 1 in Taiwan and No. 3 on the global stage ― posing a strong challenge to LG Display.

"We don't think that would be a greater challenge to LG Display. LG has already been making a stable business route by maintaining good relations with leading Taiwan and Chinese set-makers," Park Hyun, an analyst at Prudential Investment, said.

"On that point, we are keeping an 'overweight' position on LG Display shares."

Sources say CMO is planning to start a highly advanced 8.5-generation panel plant in the second quarter of 2010, making it the first such facility in Taiwan.

But Park said a weaker client base and a deteriorating financial soundness have been cited as major drawbacks.

"Although Innolux could get a chance to boost the panel production with the technology owned by CMO, it will take time for the merged entity to have strong financial soundness considering the deteriorating cash-balance at CMO," the analyst said.

"If the entity increases production capacity, that will have some impact on the market. However, without enough cash, the move will be short-lived."

LCD panels are used to make screens for devices ranging from cell phones and notebook PCs to TVs. Taiwan is currently the second-largest supplier of LCD panels worldwide after Korea.

yckim@koreatimes.co.kr