S.Korea, Japan, Taiwan Vie to Conquer Chinese Display Market

South Korea, Japan and Taiwan are set to enter a fierce competition to dominate the fast growing Chinese display market including LCD and PDP. However, the industry could be embroiled in a game of chicken like the chip industry since intense competition to bolster production could result in excessive supply.

The trio has embarked on construction of LCD panel plant in China to be the first to seize the Chinese market. Consequently, a total of eight 8th generation LCD panel line are to be founded by companies in China including Chinese companies some time around 2011.

South Korea's Samsung Electronics and LG Display earned approval from the South Korean government to build 8th generation LCD panel plants in China just last month. As soon as the Chinese government grants approval, the pair is to start the construction in 2010. Reportedly, Samsung Electronics and LG Display plan to start plant operation in Q3 2011 and Q1 2012, respectively.

Jang Won-ki , The President of Samsung Electronics LCD division said that the company will invest in Chinese market regardless of market conditions given China is Samsung's strategic market.

Japan is not far behind. Japan's Sharp is slated to construct a plant with a capacity to churn out 90,000 LCD panels in China by fourth quarter of 2012.

Taiwan's AU Optronics (AUO) and Chi Mei Optoelectronics (CMO) are also seeking to build 8th generation panel plant in Guangdong Province. The Taiwanese government plans to ease regulation on Taiwanese Display companies investing in China in early 2010.

A Samsung Electronics staff conveyed, "It is important to intensify a strategic alliance with local Chinese companies through panel plant construction in China," and added, "It also expects to bring effects of strengthening a supply network, shortening a delivery period, and cutting logistics expenses."

The issue lies in concerns on a possible excess supply.

In case every LCD panel plant begins an operation after construction, a new production capacity for the 8th generation LCD panel expands to an annual production of 7.68 million units in 2012. Such an amount is equal to outputting 61 million units of 40-inch LCD TV. On contrary, a market research institute estimated the Chinese LCD TV demand at 41 million units to 49 million units in 2012. It indicates that a supply would outnumber a demand.

Gang Yoon-heum, NH Investment Securities analyst said, "As the Chinese government plans to comprehensively revise investment schemes to prevent overlapping investments, partial plans on investment attraction could be postponed." He added, "We will be able to figure out an excess supply issue through keeping an eye on this year's investment process."

Another concern is China's strengthening competitiveness in LCD technologies. Currently, China only holds the 5th generation plant producing small LCD panels -- China's LCD TV panels are being imported from overseas markets.

Head Park Tae-seong at Knowledge Economy Ministry's Semiconductor, Display & Electric Industries Division pointed out, "Taking a chance of the 8th generation LCD panel investment, China's technological development in the next generation display areas involving solar film cell, active matrix organic light-emitting diode (AMOLED), and flexible display could be faster than expected."

[Written by Kyu-shik Kim, Seung-hoon Lee - Yen-mi Hong, Eun-jung Kim / edited by Soyoung Chung]

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