Abstract

The LCD panel industry was included in China's Eleventh Five-Year Plan, and China's LCD market is already among the fastest-growing in the world. These factors have stimulated the growth of the TFT-LCD panel industry in China.

SVA-NEC has a solid downstream foundation in the industry chain, and since the establishment of its 5G production line has been expanding its upstream operations. SVA-NEC has maintained firm relationships with Japanese companies and therefore has been able to form partnerships with upstream and downstream companies through the establishment of joint ventures. In this manner, the company has already begun tapping core technology. Particularly notable is its relationship with NEG to establish - after setting up two production lines - a glass substrate furnace in Shanghai, which is projected to help reduce production costs in the future. SVA-NEC has also partnered with Fuji Photo Film to create China's first large format color filter production facility and partnered with IVO partner MindTech on LCM (LCD Module) projects in Kunshan and Shanghai. All of these initiatives are expected to strengthen SVA-NEC more competitiveness in the LCD panel industry.

All of SVA-NEC's technology comes from NEC, and although NEC is one of Japan's five largest LCD panel manufacturers, LCD production is no longer among the company's core operations and its technology has started to lag behind the competitors. SVA-NEC is also lacking competitiveness in terms of R&D investment, R&D capabilities, and specialized technology. Meanwhile, SVA-NEC is also limited by NEC's background, which forces the company to import equipment and materials and drives up costs. Financially, SVA-NEC is hovering on the brink of profitability.

BOE obtains its technology mainly from BOE Hydis, which is one of Korea's top three LCD panel manufacturers. BOE has one of China's only three 5G production lines, and its subsidiary TPV is the world's largest monitor ODM manufacturer. However, BOE is still one or two generations behind Japanese, Korean, and Taiwanese panel manufacturers and has relatively limited production capacity since it is a latecomer to the industry. Furthermore, an excess of global production capacity and falling prices have hastened BOE's descent into unprofitability.

BOE, SVA-NEC, and IVO all have a 5G TFT-LCD production line and a monthly capacity of 90,000, 80,000 and 30,000 units respectively. However, the continually falling LCD panel prices have put the three companies in dire straits.

In late 2006, the three companies decided to merge, but because of difficulties relating to shareholding structure, the merger has been pushed back from June 2007 to the third quarter of 2007. At any rate, the merger is expected to help China's TFT-LCD panel industry found economies of scale while reducing the financial and technological risks associated with building a next-generation production line. It is also expected to help reduce costs in component procurement. Whether or not the merger will ultimately succeed, however, remains to be seen. 

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