The ground was broken for construction of the Chinese mainland's first sixth-generation production line to make LCD panels, which will cost 17.5 billion yuan (US$2.6 billion), in Hefei city yesterday.

The facility being built by Beijing-based BOE is the first major investment project since China announced its stimulus packages for the electronics industry last month.

The production line will allow BOE to produce LCD panels for the manufacture of televisions and monitors up to 37 inches in size. The country's fifth-generation plants can only produce panels up to 26 inches.

The facility, which will be able to produce 90,000 units a month, is expected to start operation by the end of 2010.

"China has to develop its own LCD panel industry as it's controlled by overseas firms. Chinese TV makers have to import LCD panels from overseas players, which reduces profit," said analyst Zhang Bing from US-based consulting firm DisplaySearch.

Competitors, including South Korea's Samsung and LG and Japan's Sharp, have built eighth-generation and above plants, which can produce panels up to 46 inches.

There was an oversupply of LCD panels last year and prices fell by up to 30 percent.

Domestic makers such as BOE and Shanghai's SVA have aimed to build advanced lines last year but the global financial crisis cut profits and made it hard to get finance.

It's still difficult to predict when the LCD market will rebound, insiders said.

Shenzhen-listed BOE lost 0.72 percent to close at 4.13 yuan yesterday compared with the Shenzhen stock index's gain of 2.08 percent.

BOE announced two weeks ago it has approval from the regulator to sell 6 billion to 12 billion yuan worth of shares to institutional investors to finance the Hefei plant.

(Shanghai Daily April 14, 2009)