From The Wall Street Journal - Friday August 28, 2009
SHANGHAI -- BOE Technology Group Co., a Chinese maker of display panels, said it will lead a consortium investing about $4.1 billion to build an advanced liquid-crystal-display factory in Beijing, another example of how China is attracting high-end manufacturing even as it remains a major maker of low-cost goods.
The announcement Thursday by BOE follows one earlier this week from South Korean LCD maker LG Display Co. that it intends to build an LCD plant in the southern Chinese city of Guangzhou that could cost more than $3 billion. Samsung Electronics Co., the biggest LCD maker by revenue, also said earlier this week it is interested in building a plant in China, though it didn't elaborate.
LCD panels are used in everything from cellphones to computer displays to TVs. Both the planned plants by BOE and LG Display are slated to use "eighth-generation," or 8G, technology, which makes panels from larger sheets of glass than earlier generations.
Most LCD plants in China use older fifth-generation technology. Using larger sheets of glass makes it easier and more cost-effective to produce panels for large-screen TVs -- 8G plants can make panels larger than 50 inches across. BOE said its facility will take 26 months to build.
Most countries have an advantage either in more labor-intensive production or in more technologically advanced, capital-intensive manufacturing and services.
China -- known as the world's factory floor making goods like shoes and toys -- in recent years has also attracted investment in higher value-added sectors like semiconductor production. Intel Corp., for example, is building a $2.5 billion computer chip plant in northeastern China's Dalian.
Companies are attracted by government incentives such as low-cost land, by the fact that much of the electronics supply chain has shifted to China and by the country's large and growing internal market. While demand for LCDs has been tepid in the U.S. and Europe, sales in China have been steady this year, thanks in part to a government program designed to spur sales of consumer electronics in rural areas.
Still, some companies are wary about making the most-advanced products in China out of concern for protecting their technology. Intel's factory will be two generations behind its other plants -- the first time the California company has built a plant at less than the state of the art.
Intel now fabricates its chips in the U.S., Ireland and Israel, but most of them are shipped to Asia for packaging and sold to customers there. So the company had an incentive to place a factory in China. But U.S. government regulations restrict exports to China of the most advanced chip-making technology, which could have military applications.
Intel spokesman Chuck Mulloy said the company deliberately avoided establishing a joint venture with a local company or accepting government investments that might have required transferring manufacturing know-how to others in China.
All of the biggest LCD panel makers are in Asia, primarily Korea, Taiwan and Japan. Asian LCD makers are rushing to build new factories as panel prices have stabilized since the beginning of the year after plunging last year because of a supply glut.
The BOE plant's technology isn't the most advanced in the industry either. Sharp Corp.'s new LCD plant in Sakai, Japan, will use 10th-generation technology, which can produce panels bigger than 60 inches. It is slated to begin operations in October.
— Jin Jing, Yun-Hee Kim and Don Clark - Printed in The Wall Street Journal, page B4