Domestic

TCL setting up new LCD production line

By Wang Xiaotian (China Daily)
Updated: 2009-11-18 07:58

Shares of TCL Corp surged to the daily trading limit of 10 percent yesterday, to 4.57 yuan (67 cents), after the appliance and top TV maker said it was setting up a thin film transistor-liquid crystal display (TFT-LCD) production line in alliance with the Shenzhen government.

The new 8.5-generation technology production line would be set up with an investment of nearly 24.5 billion yuan, said company executives.

TCL plans to form a 50-50 joint venture with the Shenzhen government-owned Shenchao Technology Investment Ltd. Both the firms would contribute 5 billion yuan each as registered capital for the venture.

The TV maker is also planning to sell 1.5 billion new shares to 10 specific investors at a price of 3.46 yuan per share through a private placement, to finance the project.

TCL setting up new LCD production line

The remaining 14.5 billion yuan will be raised via bank loans and other methods, said Chairman Li Dongsheng.

Construction of the TFT-LCD panel project is scheduled to begin in January and production likely to start in the third quarter of 2011. The new venture is likely to get full returns from its investments in 10 years.

"That is comparatively a long gestation period, even though the 6.23 percent return on investment looks promising," said Zhu Lijun, an analyst with China Galaxy Securities. The main challenge for the venture would be the management's ability to cater to the ever-changing market demand.

Zhu said the government subsidies for buying consumer appliances has triggered demand for liquid crystal displays. He expects the demand to continue for three years as most TV sets in the country would be replaced by new ones during the period.

"Domestic TV makers were until now reliant on LCD imports to cater to the growing demand. However, most of these companies are now setting up their own production lines to reduce costs," said Zhu.

But the major stumbling block for most of these firms has been the inability to make the large-size TFT-LCDs. With 60 to 70 percent of the costs going toward import of LCDs, there was hardly any room to make profits, TCL said in a statement.

TCL's announcement comes just a few weeks after its foreign rivals disclosed plans to build advanced LCD facilities in China. These include LG Display Co's $4 billion 8th-generation joint-venture in Guangzhou, Samsung Electronics Co's $2.3 billion 7.5th-generation panel plant in Suzhou, and Sharp Corp's 6th-generation plant in Nanjing, reported the Wall Street Journal.