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Amtran, LG Display tie up in China

Local liquid-crystal-display (LCD) television maker Amtran Technology Co Ltd (瑞軒) yesterday signed an agreement with South Korean panel supplier LG Display Co to create a US$20 million joint venture that would assemble LCD panel modules and flat-screen TVs in China.

The joint venture, Suzhou Raken Technology Ltd (蘇州樂軒), located in Suzhou, China, is scheduled to produce 3 million LCD modules and 5 million LCD TV sets per year when it starts operation early next year, the companies said in a joint statement.

“The cooperation will help the company secure a stable panel supply in the long term and will also help improve its cost efficiency by working with LG Display in developing new technologies,” Amtran spokesman Scottie Chiu (邱裕平) said in a filing to the Taiwan Stock Exchange.

Amtran owns a major stake in LCD TV brand Vizio, the third-largest flat-panel TV maker in North America by shipments.

Weaker-than-expected demand for LCD TVs on economic slowdown in the US has forced Amtran to trim its TV shipment target for this year to 3.2 million units from initial estimates of 4 million.

“The deal means more for LG Display than Amtran, because Amtran can buy panels at lower prices, as supply is more than sufficient now and this situation may extend into next year,” said Jeff Pu (蒲得宇), who tracks the panel industry for Yuanta Securities (元大京華證券).

However, the cooperation could provide a slight lift to Amtran’s falling gross margin, which dropped to 13.28 percent in the first half, by taking it one step further in the TV supply chain, allowing it to assemble LCD panel modules rather than merely assembling TV sets as it does now, Pu said.

“The deal will help LG Display obtain an additional exit for LG Display’s new production next year,” Pu said.

The collaboration with Amtran is expected to help LG Display expand its customer base by securing a stable and long-term source of demand for its panels, the South Korean company said in an e-mailed statement.

Furthermore, the production of LCD modules and LCD TVs in a single location should lead to the use of fewer components through joint research and development as well as significantly lower packaging and logistics costs, LG Display said.

Under the agreement, LG Display and Amtran will pool US$20 million initially to create the Chinese joint venture, in which LG Display will hold a 51-percent stake and Amtran will own 49 percent, the statement said.

Amtran shares fell 1.05 percent to NT$18.9, outperforming the benchmark TAIEX index, which plunged 3.31 percent yesterday.
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