Gov't to screen LG's move to sell LCD biz to China
LG Chem's Nanjing factory in China / Courtesy of LG Chem
By Baek Byung-yeul
LG Chem’s plan to sell its liquid crystal display (LCD) polarizer business unit to a Chinese company may hit a snag as the Korean government moves to designate the technology as a national core technology, making it difficult to sell related technologies outside the country, sources said Monday.
Sources said the Ministry of Trade, Industry and Energy will hold a meeting this week to decide whether LCD polarizer technology has any correlation with eighth-generation or higher generation thin film transistor (TFT)-LCD panel making technology, which is currently designated as a national core technology.
LCD polarizers are used to manufacture TVs, smart phones and vehicles. Last month, LG Chem announced it had signed a deal to sell its LCD polarizer business unit to China’s Shanshan Chemical for 1.3 trillion won ($1.1 billion).
If the trade ministry concludes that the LCD polarizer technology is part of the eighth-generation LCD panel technology and designates it as a national core technology, LG Chem is required to earn the government’s permission before proceeding with a deal.
However, industry officials believe chances of its designation as a national core technology are slim as industry trends are shifting.
“When LG Chem announced its deal with the Chinese company, industry analysts welcomed the decision as the display industry is shifting its focus from LCD business to organic light emitting diodes (OLEDs).
The LCD polarizer technology is nothing new anymore. It is widely used by other companies in other countries, so it seems chances are slim that the technology will be designated as one of the core technologies,” an industry official, who requested anonymity, said.
LG Chem said it decided to sell the business to focus on its OLED business, which LG Group thinks will become its future growth engine. Also, the money the company will secure from selling the business will be used in its material business for automobiles and batteries for electric vehicles (EVs).
The government has designated several core technologies in the display, semiconductor and shipbuilding sectors as national core technologies. By making it hard to leak related technologies outside the country, the government has tried to protect the local industry. So far, 69 technologies in electronics, automobile, steel, shipbuilding, nuclear power and other sectors have been named as core technologies.
LG Chem, the world leader in the EV battery business, has been pouring money into the battery cell business.
If the government decides not to allow LG to sell its LCD polarizer unit to the Chinese company, LG Chem’s plan to increase investment in promising EV battery and OLED polarizer businesses may face setbacks.
When LG announced its bid to sell the LCD polarizer unit, June 15, Moody’s said, “This transaction, if carried through, is credit positive for LG Chem, as the sale proceeds will limit increases in debt and help the company fund capital spending for its fast-growing battery business.”
“LG Chem has been in a heavy investment cycle since 2018 and we expect capital spending to stay high at least until 2021. The company’s large investments will be used mainly to expand its electric vehicle (EV) battery capacity and to build a new naphtha cracking center, as it seeks growth opportunities and further business diversification,” the U.S.-based ratings agency added.