Chinese leading TV maker Skyworth Group has proposed to collaborate with other major domestic TV makers to jointly build a TFT-LCD (thin-film transistor - liquid crystal display) panel manufacturing facility to reduce reliance on foreign manufacturers.

The move underlines the growing desire of Chinese TV makers to increase profit margins amid the rapid transformation of the domestic TV market from traditional TV sets to flat screen TVs.

Wang Dianfu, chairman of Skyworth, said the top four Chinese TV makers TCL, Sichuan Changhong, Skyworth and Konka need to join hands to build a TFT-LCD panel plant.

"LCD panel manufacturing is largely monopolized by foreign companies. For the future, we need to build our own strength in this technological area," Wang told China Daily.

However, Wang said that Skyworth has yet to discuss the proposal for the establishment of the facility with the other three TV makers.

He dismissed media reports that the four companies will submit a proposal soon to regulators to build such a facility.

"So far, it's only our wish and is yet to be put on the table," he said.

Wang estimated that the proposed TFT-LCD plant, if passed, could cost 10-20 billion yuan (US$1.25-2.5 billion).

Currently approximately 70 percent of flat screen TV panels in China are imported.

Building their own flat-panel plant could help Chinese TV makers to generate a higher profit margin since the actual panel usually accounts for about 80 percent of the cost of a flat screen TV, according to Wang.

Prospects for the flat screen TV market are rosy because of the increase in spending power of Chinese consumers. Nevertheless, TV makers are currently generating less and less profit due to intensifying competition and a lack of core technology related to panel manufacturing.

The combined market share of Chinese flat screen TV makers has exceeded that of foreign makers since June last year on a unit basis. However domestic makers are largely importing panels from abroad and selling the complete TV sets with low profit margins, noted Wang.

The chairman said he has talked with senior government officials who have given preliminary support to the proposal.

But he warned a lack of funds and core technological resources could kill the proposal.

The Chinese firms BOE Technology Group and Shanghai SVA (Group) Co Ltd run two fifth-generation TFT-LCD panel manufacturing facilities.

In June, the third fifth-generation TFT-LCD panel plant in the country, involving an investment of US$630 million, was approved by the regulators and is being built in Kunshan, in East China's Jiangsu Province.

Currently, the flat-panel supply by domestic firms is far from meeting the surging demand for LCD TVs in the country.

According to a report by the Development Research Centre of the State Council, flat-panel TV sales have been growing by more than 200 percent annually in China in the past two years.

Lu Renbo, a researcher with the centre who has long been researching the domestic home appliance market, said it is impossible for domestic TV makers to jointly build a TFT-LCD panel manufacturing facility.

That is because "a flat-panel plant requires a huge investment and the related technology is advancing so quickly that domestic companies will struggle to keep up," said Lu.

Foreign companies such as Sony and Samsung are already producing seventh-generation LCDs.

Skyworth's Wang said he hoped to build a sixth-generation LCD panel plant at best.

"When the plant begins operations, the technology may already be out of date," Lu said.

Xiamen Overseas Chinese Electronics (Xoceco), a smaller domestic TV maker but one of the top three vendors of LCD TVs in China, was not available for comment on Skyworth's proposal.

According to a note filed to the Taiwan Stock Exchange on Monday, Taiwan's panel maker Chunghwa Picture Tubes (CPT), plans to buy a 29.87-36.16 percent stake of Xececo.

The acquisition, pending approval, will ensure a stable supply of flat panels for Xoceco.

(China Daily November 18, 2005)