BEIJING - Leading
Chinese TV maker Skyworth Group has proposed a
collaboration 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. TFT-LCDs, which display color
images, are the most important component in
flat-screen TVs and computer monitors.
The
move underlines the growing desire of Chinese TV
makers to increase profit margins amid the rapid
transition 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
had 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 would 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 built, could cost 10-20
billion yuan (US$1.25-2.5 billion).
Currently, approximately 70% of the flat
screen TV panels used in Chinese factories 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% 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, profit margins in the TV
industry have been falling 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 had talked with
senior government officials who had 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 regulators and is being
built in Kunshan, in East China's Jiangsu province.
Currently, the flat-panel supply by
domestic firms far from meets surging demand for
LCD TVs in the country. According to a report by
the Development Research Center of the State
Council, flat-panel TV sales have been growing by
more than 200% annually in China in the past two
years.
Lu Renbo, a researcher with the
center who has long been researching the domestic
home appliance market, warned that 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, and 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 with the Taiwan Stock Exchange on
November 21, Taiwan's panel maker Chunghwa Picture
Tubes (CPT), plans to buy a 29.87-36.16% stake in
Xoceco. The acquisition, pending approval, will
ensure a stable supply of flat panels for Xoceco.
Koreans eye four-way
consortium Korean industry sources said
November 22 that the plan by four Chinese display
makers to set up a joint plant would raise the
level of competition in the global LCD market, now
dominated by South Korean companies.
Skyworth Group, Konka, Sichun Changhong
and TCL are in negotiations on the joint venture
in an attempt to lower costs and increase profits
in producing LCD panels. The Chinese companies are
planning to build fifth or sixth-generation
production lines by investing 10 billion yuan
(US$120 million) to 20 billion yuan, the sources
said. Succeeding generations of LCDs allow
manufacturers to produce bigger panels at a lower
cost.
"The tie-up will not have an
immediate impact on the global LCD market. But in
the long term, competition could be much fiercer
as those Chinese companies will supply more LCD
panels to the market," a Samsung official said. In
particular, he said, Taiwanese companies would
bear the brunt of the increased competition since
they also produced fifth-generation LCDs.
Experts said the move by the Chinese firms
would not seriously affect South Korea's LCD
giants, including Samsung Electronics Co and
LG.Philips LCD Co, because they were well ahead of
the Chinese rivals in technology and price
competitiveness. Samsung has already begun mass
producing seventh-generation LCDs, while
LG.Philips will launch the upgraded production in
the first half of next year.
Samsung and
LG.Philips account for a combined 40% of the
global LCD production, while Chinese companies
make up only 4%. "Currently there is little to
worry about, but we are paying very close
attention to the Chinese companies, because the
Chinese market will expand really fast in the next
few years," an LG.Philips official said.
