Korean Government Approves Samsung and LG Display Investments in China
By David Hsieh – Vice President, Greater China Market, DisplaySearch
On December 24, the Korean government announced that it had officially approved direct investment by Korean TFT LCD companies in China. The specific projects at issue are Samsung’s Gen 7 project in Suzhou and LG Display’s Gen 8 project in Guangdong.
With China emerging as the largest LCD TV market and in consideration of possible import tariffs, Korean, Japanese and Taiwanese panel makers have been proposing investments in China, and LG Display, Samsung and Sharp have all taken steps towards those investments. Political concerns about technology leakage and domestic employment have led to extensive government review.
The, Korean government’s approval included several conditions, including the continuation of domestic investment, the use of Korean equipment in the Chinese plants, and prevention of technology leakage.
Both Samsung and LG Display’s projects will still need to China’s governmental approval, which is necessary for any foreign companies investing there.
Several impacts of this approval are likely:
- The Taiwanese government will feel pressure to approve AUO, Chi-Mei InnoLux or other smaller panel makers’ investments in China.
- Gen8 investment projects by domestic companies like BOE and TCL will accelerate.
- Glass substrate makers will see the need to build tanks in China to support the emerging TFT LCD fabs.
- China’s share of TFT LCD capacity and shipments will rapidly increase within two years when most of these Gen7 and 8 fabs are built and ramped up.
- Component and materials production will start to move to China, and build a more complete supply chain.
- The Samsung and LG groups will continue investment in Korea, especially AMOLED and the Gen 8+ fabs.
What do you think? Do companies have to build in China in order to win in China? Is the China TV market big enough to digest the panels from so many new investments ramping up at the same time? The possible investments in China include BOE (Gen 6 and 8), TCL (Gen 8), Samsung (Gen 7), LG Display (Gen 8), the Sharp CEC Panda joint venture (Gen 6 and 8), and Kunshan (Gen 7).
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If they build greefield, given the more modest infrastructure in China, the fabs will come on stream mid 2011. The real question would be,”What do panel producers do in 2010 to meet the aggressive shipment goals of the NB and set makers?” If they don’t add capacity in 2010 they will lose share and be unable to meet demand. While this will cause prices to rise at first, demand elasticity, especially in China would seemto be a bigger issue than in the past, and demand would drop off. More likely, they will build capacity in 2010 as planned, leaving a very difficult situation in 2011 as each major producer adds capacity on the mainland and has already built capacity local capacity. If China does notramp at an accelerated pace, wouldn’t this leave the industry in an oversupply situation in 2011?