Chinas frustrating LCD hesistance
Samsung, LG forced to redraw regional strategies
By Kim Yoo-chul
Staff reporter
South Korea's Samsung Electronics and LG Display, the world’s two biggest liquid crystal display (LCD) makers, are struggling to adjust their business strategies for China, with Beijing apparently in no hurry to decide whether or not to allow the companies to build production lines in the country.
Industry sources told The Korea Times that Samsung is close to announcing plans to spend 1.5 trillion won (about $1.31 billion) to expand LCD production facilities in Korea, as the prospects of a Chinese line seems more unlikely.
"We believe that it will take another month for Beijing to announce which companies have won the rights to establish flat-panel lines in China," a Samsung Electronics official said.
Company officials said they need to react quickly to the growing demand for flat-screen televisions in China, as well as the economic recovery in other regions and major sporting events such as the FIFA World Cup finals in South Africa creating a jolt in demand.
"We can't wait forever for Beijing to give us the go ahead. We have been suffering from difficulties related to the uncertainties of our LCD abilities and were at risk of missing out on the growing market in China," said the Samsung official, although the company's representatives declined to make an official comment on the company's LCD investment plans.
According to U.S. research group, iSuppli, LCD television shipments in China are expected to jump 40 percent year-on-year to 80 million in 2010, taking up about 84 percent of the flat-screen television shipments.
Although LCD makers are looking to increase their production capabilities to meet the strengthening demand, there are looming fears of a possible oversupply in the flat-panel market, which may explain part of Beijing's wait-and-see approach in licensing foreign companies to build LCD lines in China.
Samsung and LG Display are joined by Japan's Sharp and Taiwan's AU Optronics on China's waiting list. However, the Chinese government has been granting quicker approvals for domestic firms, such as television giant TCL and LCD maker BOE Technology, to expand their manufacturing lines.
"Sharp is considered the underdog here, which may be related to the political dynamics between China and Japan. So Samsung, LG and AUO are competing for what will likely be two tickets," said another industry official.
LG Display is also maintaining a close eye on the situation in China, despite the company's chief executive Kwon Young-soo telling reporters earlier this year that the decision will be made by April.
The company could consider building a new LCD line in South Korea should it be snubbed by China.
To that effect, LG Display said it will spend 727 billion won to build a new LCD plant at its LCD complex in Paju, Gyeonggi Province, by the end of 2011.
"For now, we can't do anything but weight. Of course, we will also have to prepare a plan-B," said an LG Display official.