China stalling on Samsung, LG

By Kim Yoo-chul

China, already flooded with foreign investments and keen on technology transfers, is stalling on requests by Samsung Electronics and LG Display to build LCD factories.

The mood in both companies has been dampened by the delay, likely causing disruptions in their business plans.

Beijing’s approval was expected by April but has been delayed.

According to representatives of both firms, Beijing didn’t explain the delay. For LG, a trip by the company’s CEO together with reporters was scheduled for August but has been put on hold.

Industry sources speculate that China is trying to protect its own manufacturers, while trying to favor Taiwanese firms after the two were brought closer through an Economic Cooperation Framework Agreement (ECFA).

Taiwanese manufacturers compete with the two Korean firms in LCDs that are used in virtually all mobile gadgets.

They say that China is choosing the Taiwanese firms over Korean companies in pursuit of vital technology such as in thin film transistors (TFT), while protecting its own LCD producers.

Samsung and LG are using finer eighth-generation technology in producing flat-screens — China is still using fifth generation.

“China’s leading LCD makers are asking Beijing to delay the final decision for foreign LCD makers, citing their lack of technological competitiveness,” a top industry executive said.

“Chinese LCD makers will be able to compete with Samsung and LG,” he said.

The stalling tactic is vexing Samsung and LG because they fear their strategic advantage may be compromised by the delay. China is expected to overtake the United States to become the world’s biggest LCD market.

According to sources, both companies are offering China technology transfers.

Samsung spokesman Song Chul-gyu and senior spokesman at LG Display Sohn Young-june declined to comment.

However, others say that other firms are making competing offers.

“Beijing is favoring Foxconn Technology Group,” a source said.

Foxconn Technology has the world’s No. 3 LCD maker Chimei Innolux as it key affiliate, and the Beijing government is likely to approve its 8.5-generation LCD line in Chengdu, Sichuan Province, western China.

“Foxconn is offering to transfer its own next-generation organic LED or OLED technologies to China’s local makers,” the source said.

The Chengdu project of Foxcoon includes a total investment of $5 billion, and upon completion will employ 100,000.

Samsung and LG Display haven’t begun preparing detailed plans such as hiring levels as they are still waiting for approval.

“The only thing we can do is just wait,” said Samsung’s Song. Samsung plans to invest 2.6 trillion won to build a 7.5-generation LCD plant, while LG Display has been set to inject 4.7 trillion won to construct a finer eighth-generation one.

But LG is implementing its “Plan B” for the worst-case scenario, further investment in its Korean LCD complex in northern Seoul, while Samsung’s next move isn’t known.

중국, 삼성-LG 견제

이미 외국첨단산업 자본으로 넘쳐나는 중국이 삼성과 LG의 중국 LCD공장 건설 요청을 지연시키고 있다. 중국의 승인은 4월달에 예정되어 있었지만 여태까지 지연되어 왔다. 두 회사에 따르면 중국은 연기에 대해 설명 조차 없었다고 한다.

전문가들은 중국이 경제협력기본협정(ECFA)를 통해서 대만의 기업에 이익을 주면서 자국의 제조업을 보호하고 있다고 추측했다. 대만의 제조업자들은 사실상 모든 휴대 전자제품에 쓰이는 LCD분야에서 삼성-LG와 경쟁하고 있다.

한 LCD업계 고위 간부는 중국 기술의 경쟁력 부족을 꼬집으며 "중국의 주요 LCD제조업자들이 해외 LCD업자들의 중국진입을 반대하고 있습니다"고 밝혔다. 또 한 관계자는 "중국은 폭스콘을 대폭 밀어주고 있습니다"고 말했다.

세계에서 규모가 세번째로 큰 LCD제조회사인 이노럭스를 소유하고 있는 폭스콘은 8.5세대 LCD생산라인을 곧 중국 정부로부터 인증 받을 예정이다.