Fri, Dec 03, 2010 - Page 11 News List

Samsung, LG to build Chinese plants

APPROVED:Samsung will build a US$2.3 billion 7.5G plant in Suzhou and LG Display will build a US$4 billion 8G plant in Guangzhou, while AUO and Sharp await approval

Bloomberg

Samsung Electronics Co and LG Display Co, the world’s two biggest LCD makers, said they received the Chinese government’s approval to build LCD factories in the country and meet surging demand.

Samsung spokesman James Chung and Son Young-jun at LG said yesterday the companies received notices from China about the decision last week.

The approval paves the way for the two South Korean companies to build multibillion-dollar factories in Suzhou and Guangzhou to meet Chinese demand for flat panel displays used in TVs and computers. Setting up the plants will enable the companies to be closer to the assemblers and reduce costs, Seoul-based analyst Choi Do-yeon said.

“China is a market where a very large number of households haven’t switched to LCD televisions yet,” said Choi, an analyst at LIG Investment & Securities Co. “Even though it’s the fastest growing market in the world, it still has a lot of growth potential. The new factories can be beneficial in terms of securing distribution channels.”

China became the largest LCD-TV market in the third quarter, surpassing the US, according to Soh Hyun-cheol, an analyst at Shinhan Investment Corp in Seoul. About 39 million units will probably be sold in the country this year, and sales are estimated to increase to 46 million next year, he said.

The South Korean government approved the companies to go ahead with the projects last December, while asking them to find ways to prevent technology leaks. According to Korean law, the government has the option of blocking the transfer of technologies deemed strategic.

China’s government accepted the applications of LG and Samsung in February, according to Chung and Son. Samsung, the world’s largest LCD maker, expects to start operating the factory in about a year-and-a-half, Chung said.

Samsung’s proposed 2.6 trillion won (US$2.3 billion) plant in Suzhou will be based on the so-called 7.5-generation LCD technology, while LG Display’s US$4 billion factory will use eighth-generation technology. Eighth-generation plants are designed to make displays measuring more than 40 inches diagonally.

AU Optronics Corp (AUO, 友達光電) in March became the first Taiwanese LCD maker to apply to the Taiwan government for approval to set up a panel factory in China after the government relaxed restrictions. That application has not yet been approved by the Taiwanese government, AUO spokeswoman Hsiao Ya-wen (蕭雅文) said yesterday.

“We have to get Taiwan government approval before we can take the next step” of applying to China, Hsiao said.

Japan’s Sharp Corp, which had also sought permission to build a display factory in the country, hasn’t received any such notification from the Chinese government, spokeswoman Miyuki Nakayama said.

Sharp, Japan’s largest LCD maker, said in August last year it reached a preliminary agreement with China Electronics Corp (中國電子) to form a venture to make LCDs based on 8G technology. The company also said it will sell LCD manufacturing equipment to China.

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