By Kim Yoo-chul
Korea’s major display manufacturers Samsung and LG Display are facing a bumpier road in 2013 as they will have to cope with deepening oversupply issues caused by Chinese firms’ expansion of liquid crystal display (LCD) production.
``The Chinese government is giving substantial help to its leading LCD suppliers as Beijing still believes subsidy programs are going to push consumption in the domestic market. That’s why major Chinese LCD makers are expanding their facilities,’’ said unnamed officials from the South Korean finance ministry by telephone, Friday.
Despite the bearish market, leading Chinese LCD suppliers including the largest BOE and CSOT have been expanding outputs helped by increased subsidies for appliances by Beijing.
According to foreign media, BOE of China decided to invest $5.3 billion to build its third eighth-generation LCD plant through investment. The new plant will go on-line from the second quarter of 2015, while CSOT plans to expand its annual LCD capacity.
Chinese firms’ move to expand production is expected to weigh on Samsung and LG, which are already hit by slow growth in television sales from the cloudy economic situation in major markets, including Europe to the United States.
Against this backdrop, Korean firms are moving to realign their LCD plant-building projects in southern China.
Officials and market analysts say Samsung and LG are mulling rescheduling the completion of the projects.
Samsung is scheduled to start its advanced LCD panel plant in Suzhou, China, from the latter half of 2013. The plant will cost more than 2.4 trillion won, Samsung said.
LG plans to complete its 4 trillion won LCD plant in Guangzhou from the second half of 2014. The two companies are currently building the plants.
Both plants could produce panels bigger than 50-inches, known as eighth-generation panels, but they can also be shifted to mass-produce panels below 50-inches according to market situations.
``There is no reason for the Korean LCD makers to start operations as scheduled if Chinese LCD suppliers expand facilities, steadily. They don’t want to give the wrong signal to the global flat-screen industry by making a hasty decision,’’ said an unnamed government official in Seoul.
Some experts said that they will start operations of the new plants as scheduled but production will be limited.
``Samsung will go online as planned. But the amount of initial volume from its Suzhou factory will be limited,’’ said a senior manager from a U.S.-based investment bank in Seoul by telephone.
``LG Display will initially produce LCD panels for monitors and medium-sized televisions and chances are very low that LG will invest more for its Guangzhou plant beyond its initial budget as the global LCD market is on a downward trend,’’ he said.
Samsung representatives declined to comment about its updated business
strategies, while Sohn Young-june, a spokesman for Seoul-based LG Display, said his company will operate its Guangzhou factory as scheduled.
``We can’t resist but to operate the plant due to pending issues such as tariffs and brand awareness. We know of moves by Chinese LCD makers and already acknowledged a possible oversupply a few years later,’’ said an LG official.
Samsung and LG's LCD-making rivals in Japan and Taiwan are also moving to set up manufacturing facilities in China to take advantage of growing demand and lower costs.