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BOE Technology and SVA Group merger set to boost profitability after two years

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A saleswoman stands near a giant liquid-crystal display (LCD) television made by Sony Corp on display at a flat panel TV exhibition held in Beijing in October.

PHOTO: AP

BOE Technology Group Co (京東方) and SVA Group (上海廣電), China's biggest makers of liquid-crystal displays (LCDs) for computer monitors and televisions, may be able to increase profitability two years after merging their LCD operations.

"The larger production scale that BOE and SVA get through a merger will help cut costs," Brian Chen, an analyst with Austin, Texas-based research company DisplaySearch, said by telephone on Saturday. "That could make them a more competitive player in two years."

BOE Technology, based in Bei-jing, and Shanghai-based SVA Group said on Thursday they had agreed to merge their operations. The companies said they expect to sign an agreement before Jun. 30.

The merger will allow BOE Technology and SVA to invest in a production line for larger, more expensive LCD panels by pooling their resources, said Wang Jinyan (王金豔), an electronics analyst at Industrial Securities Co.

The Chinese companies, which mostly sell panels for computer monitors 17 inches diagonally in size, have suffered losses as the price of these products fell.

"BOE and SVA are being forced into this merger," Wang said on Friday by phone from Shanghai. "They don't have the resources to survive independently."

The company formed through the merger will be based in Shanghai, they said, without giving more details.

The price of a panel for a 17-inch LCD computer monitor may fall to US$122 in the current quarter, while the cost of production declines to US$121, according to DisplaySearch. The price in the last quarter was US$126 and the cost was $124, Chen said.

BOE Technology, China's biggest LCD-panel maker, said in October it expected to post a second consecutive annual net loss for last year.

The company posted a loss of 108.9 million yuan (US$13.9 million) in the third quarter of last year, compared with a loss of 379.1 million yuan a year earlier.

SVA Electron Co, the Shanghai-listed unit of SVA Group, posted a third-quarter net profit of 3.44 million yuan, less than one-seventh the profit it reported in the third quarter of 2004.

The company posted a loss of 146.9 million yuan in the third-quarter of 2005.

Samsung Electronics Co, the world's biggest LCD-panel maker, said last month it expected demand for LCD TVs to rise 53 percent next year, fueled by demand for sets measuring at least 40 inches diagonally.

AU Optronics Corp (友達光電), Taiwan's biggest maker of LCD panels, said in July it was planning to borrow NT$50 billion (US$1.5 billion) to double capacity at its Taichung factory.

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