The Chinese mainland has taken a major step toward manufacturing its own LCD TV screens for the first time with construction beginning on several new plants around the country.

The multibillion-dollar lines, involving investment from companies like South Korea-based LG and Beijing-based BOE Technology Group Co, are expected to start operation at the end of 2010 or in 2011.

The larger made-in-China liquid crystal display panels will feed production in the world's No. 1 television market, where more than 20 million flat panel TVs were sold last year.

"It's a remarkable moment for the young domestic LCD industry because it will greatly relieve dependence on imported panels from overseas firms," said Joyce Yang, an analyst at SEMI, a United States-based IT consulting firm.

BOE, which is listed on the Shenzhen Stock Exchange, announced last month it would invest 28 billion yuan (US$4.12 billion) to build an eighth-generation LCD panel plant in Beijing.

BOE's new plant will make panels for 26-inch to 55-inch TV sets. The construction of the facility will be completed within 26 months. The plant is expected to generate an average annual output value of 100 billion yuan, according to BOE.

The advanced lines allow makers to cut larger-sized LCD panels with higher efficiency, improving profit margins, experts said. Until now, domestic production of LCD screens has been limited to small panels used in computers.

Potential risk

"Moving higher up the technology ladder is a necessary step for China though it has potential risks because LCD panel manufacture is a capital-intensive industry," said Zhang Bing, an analyst of DisplaySearch, a US-based research firm.

Last month, South Korea-based LG Display Co also announced that it would build an eighth-generation LCD plant in Guangzhou.

LG Display, the world's second-biggest LCD panel maker, signed a memorandum of understanding with the Guangzhou city government to build a 5 trillion won (US$4 billion) LCD panel plant.

The factory will turn out 50-inch panels for LCD TVs.

Also last month, BOE said it will build a sixth-generation plant in Anhui Province to make panels for LCD TVs up to 37 inches.

Meanwhile, Japan-based Sharp Corp announced it will sell a sixth-generation LCD panel line to CEC-Panda for a plant in Nanjing, capital of Jiangsu Province.

Each advanced LCD panel line costs US$2 billion to US$5 billion, with the majority of capital provided by the Nanjing and Anhui governments.

Sharp and CEC-Panda also plan to build an eighth-generation line, producing screens for televisions that will be sold mostly in China. But the companies didn't reveal the size of the investment, the location of the project or when the line will be operating.

Samsung, the world's No. 1 LCD maker, aims to build an advanced line in Suzhou, Jiangsu Province, or in Shenzhen, Guangdong Province, Chinese media reported.

LCD panels account for about 70 percent of the cost of an LCD monitor or LCD TV.

Advanced lines

BOE, SVA-NEC, Tianma and most domestic LCD panel makers are currently using fifth-generation or lower technology in LCD panel lines, which are used in laptop or desktop monitor screens.

Overseas firms, including Samsung, LG and Sharp, have eighth-generation or even more advanced lines producing panels for more profitable 40-inch or above LCD TVs.

Skyworth, Changhong, TCL and other Chinese TV manufacturers now have to import panels from overseas. The added cost of importing squeezes profit margins for the companies, which account for about four out of every five television sets sold in China, according to DisplaySearch.

"It's dangerous when your overseas supplier is also selling its own brand LCD TV," said Zhang.

"It's also a risk because too many players are crowding into the same game at the same time," said Zhang.

In 2012, China will surpass North America to become the world's largest LCD TV market, according to DisplaySearch.

In that year, China's LCD TV sales will rise 69 percent from this year to 39.4 million units. In the same period, sales in North America will rise 19 percent to 37.3 million.

Globally speaking, new features in TVs, such as ultra-thin designs and high-definition displays, will be a driving force in sales, analysts said.

"China's stimulus programs are expected to lift 2009 (LCD TV) sales by at least 3 million units," said Li Fang, president of Corning Inc's China Display division.

Corning, which tracks trends in the LCD panel market, is the world's biggest manufacturer of glass for LCD screens.

The potential for growth in the LCD TV market in China rests heavily in rural areas of the country. As part of the national stimulus program, China is offering rural residents a 13 percent subsidy on the price of new appliances.

(Shanghai Daily September 18, 2009)