LG and Samsung to build 8th generation LCD plants in China

China is to announce its approval of plans for the world’s two largest flat -screen manufacturers, Samsung and LG, to build 8th generation LCD factories in the mainland.

It is expected that China will become home to the largest market for flat screen TVs in the near future and manufacturing firms are looking to head to the country.

“There was some speculation that only one Korean company would get approval from China due to concerns about a supply glut, but both Samsung and LG Display have won approval from China,” one source said.

Previously both LG and Samsung would only have back-end assembly lines in China due to fears over technology leaks, housing their high end plants in Korea.  The new manufacturing plants will be more advanced facilities which will seek to produce LCD panels for flat-screen TVs.

Back in October 2009 Samsung stated that it would build a 7.5 generation LCD panel plant in, Suzhou, paying approximately $835 million in a joint venture. LG announced similar ambitions last year for a $4billion 8th generation plant in China.  An 8th generation plant is capable of churning out 50 inch screens, while 7.5 generation plant will be able to manufacture 40inch screens.

The South Korean government gave the go ahead for the screen manufacturers to export their technology due to the increasing importance if the LCD TV market in China, according to the Wall Street Journal. 

However there have been concerns raised with regards to potential over-production.  While it will mean that the two firms can potentially boost their market share – currently amounting to 50 per cent combined – it is feared that building more manufacturing plants could lead to a supply glut having an adverse effect on profitability.

“Since three other local Chinese companies are also building LCD plants, which will likely start operation in the latter half of 2011 at the earliest, there’s a high possibility of an industry oversupply some time in 2012,” said an analyst at Shinyoung Securities, Yoon Hyuk-jin.

Taiwanese firm AU Optronics is also waiting to set up a plant in Kunshan, China, having aparently received approval from Chinese authorities, but  is currently awaiting the green light from the Taiwanese government.

The plants will allow sales of approximately 40 million units, while not having to pay import tariffs, says The Chosunilbo.