LG Display aims high in China
LG Display aims high in China
LG Display's flat-screen facilities in Guangzhou, southern China. LG started producing TV displays mostly to be used in large-sized televisions from the production site, the world's biggest in the industry in terms of scale and investment. / Courtesy of LG Display
With huge tax benefits, company partners Korean suppliers to pursue localized business strategy
By Kim Yoo-chul
GUANGZHOU, China ― LG Display is aiming high in China, which the company believes is the most crucial business market, since it started operating its mega display complex in the southern Chinese city ― a symbol of closer business ties with Beijing and a solid partnership with leading Chinese TV makers.
The global display industry is seeing signs of decline these days as displays are becoming commoditized due to market saturation. Unlike in the past, technology barriers have been eased, prompting the South Korean display giant to figure out "what's next" for future growth.
Officials said that LG has a "first-mover" advantage and its mega display complex in southern China will lay the groundwork to further strengthen its status in the industry.
LG said in a statement that its latest LCD ― liquid crystal display ― complex in Guangzhou is now operational. The plant, which is a result of about $4 billion, will be customized to roll out panels over 42-inches. It is the world's biggest panel plant in terms of size and investment.
The complex employed 1,500 as of July. The facilities are on a 330,000-square-meters tract. LG was given of 2 million square meters by China to build its LCD cluster.
"China is the world's biggest TV market. Our advanced display plant in the southern Chinese city is operational. LG still sees that the Chinese market has further growth potential because the demand for premium TVs remains strong. LG can't afford to lose the opportunity," a company statement said.
China led in global TV demand last year by revenue, with the country taking up 29.4 percent. North America was the runner-up with 20.1 percent, followed by Western Europe with 13.8 percent, according to an analysis by DisplaySearch, a market research firm.
By the second quarter of this year, LG was the biggest display supplier in large-sized panels mostly being used in televisions, globally, with a share of 25.2 percent, followed by Innolux of Taiwan with 20.2 percent, said the researcher.
LG applied cutting-edge glass-cutting technology at the plant. It is optimized to cut sheets of 55-, 49- and 42-inch panels.
Higher generation plants use larger glass substrates to make LCD panels, which boosts output and lowers manufacturing costs. LCDs are the screens used in everything from mobiles to televisions.
Experts earlier predicted a trend in which flat-panel TVs keep getting bigger. China has become the major driving force in the market with TVs measuring more than 40 inches being the most popular.
"The initial inputs of the plant would be 60,000 glass sheets, monthly. By 2016, the facilities will reach a monthly maximum of 120,000 sheets," said the statement.
Collaboration, tax incentives
The Guangzhou complex is a result of closer cooperation with the Chinese authorities and leading TV manufacturers there, as the LG affiliate pursues localized business strategies.
Out of the total investment in the plant, China was responsible for 20 percent, followed by Skyworth, a long-time partner of LG and China's top TV producer, with 10 percent.
"The Guangzhou plant is with our major Chinese clients," said LG spokesman Lee Hyung-kook. The products produced by the plant will be shipped to other leading Chinese consumer electronics companies such as Konka based in Shenzhen and TCL in Huizhou.
Such regional advantages will help LG save costs in logistics and workforce, strengthening its overall cost competitiveness.
Beijing guarantees tax and administrative benefits in return for inviting technology-driven Korean companies as the LG Group of affiliates, including LG Display, have been regarded as reliable foreign investors over the decade.
The two sides found common ground about tax benefits, among other things, to get LG to invest there. LG will hire more Chinese to operate the plant, which will be helpful in boosting the local economy.
Localization, therefore, is the key word for LG and it is ready to mass-produce premium screens to awaken idling demand for pricey electronic devices from affluent Chinese consumers.
The LG statement said that the plant shows LG's commitment to consistently pursuing localized business strategies in China to guarantee on-time delivery, output commitment and even better pricing.
LG already operates display module plants in other Chinese cities in Nanjing, Yentai, as well as Wroclaw of Poland and Reynosa of Mexico.
"As we realized a 'vertical integration' from modules to panels thanks to the operation of the Guangzhou plant, our business in China will keep running," said a spokesman.
Eco-system, no tech leaks
The Guangzhou complex isn't just another manufacturing facility that LG added as LG Display aims to create a new LCD value chain system by bringing its Korean suppliers.
Unlike the plasma panel business, the LCD industry needs to be backed up by a lot of equipment and materials suppliers, which are positioned well for "chain effects" to other related industries.
For "shared growth" between larger conglomerates and Korean small and medium-sized enterprises (SMEs), LG joined hands with six suppliers, including a local materials company ENF Technology.
The LG spokesman Lee said it's been in talks with several other Korean suppliers for closer cooperation in business projects in China.
"When LG built a module plant in Guangzhou back in 2007, we've partnered with 10 Korean partner companies. As the LCD industry is enabled to create a value chain from parts to finished goods, LG will invest more on co-prosperity," he said.
For example, LG Display is communicating with Chinese authorities to help its Korean partners receive what company officials say is "substantial support" for electricity and real estate in shorter periods of time.
"We can't do it alone. Because LCD products are the artworks with a combination of technology, workforce, investment and closer cooperation with partners, LG's competitiveness in the industry lies in support and partnership with our Korean partners," said the spokesman.
As LG plans to invest more in that panel plant according to market situations, local suppliers will sell more equipment, helping them strengthen their bottom line.
Chinese authorities are serious about limiting pollution as past efforts have stumbled on the altar of economic growth.
Given the weight of social pressure on the ruling Communist Party to do something about pollution, Chinese authorities are asking foreign companies to abide by strengthened regulations on the environment.
LG Display's Guangzhou plant has met those requirements. Its key manufacturing processes were authorized and LG said it's unlikely that the plant will raise environmental issues anytime soon.
The affiliate also plans to actively take on labor-related issues as major South Korean technology companies are becoming sensitive about updates of working conditions of their suppliers in overseas countries, such as those in China, as they hire workers via those contract suppliers to manufacture goods.
An LG Display official said the company will strengthen its hiring process not only at its manufacturing facilities but also its contractors to prevent any recurrence.
"LG takes labor-related issues very seriously and in any case, it shouldn't be allowed to hire 'underage personnel' at our factories and those of our parts suppliers," he said.
LG Display's flat-screen facilities in Guangzhou, southern China. LG started producing TV displays mostly to be used in large-sized televisions from the production site, the world's biggest in the industry in terms of scale and investment. / Courtesy of LG Display
With huge tax benefits, company partners Korean suppliers to pursue localized business strategy
By Kim Yoo-chul
GUANGZHOU, China ― LG Display is aiming high in China, which the company believes is the most crucial business market, since it started operating its mega display complex in the southern Chinese city ― a symbol of closer business ties with Beijing and a solid partnership with leading Chinese TV makers.
The global display industry is seeing signs of decline these days as displays are becoming commoditized due to market saturation. Unlike in the past, technology barriers have been eased, prompting the South Korean display giant to figure out "what's next" for future growth.
Officials said that LG has a "first-mover" advantage and its mega display complex in southern China will lay the groundwork to further strengthen its status in the industry.
LG said in a statement that its latest LCD ― liquid crystal display ― complex in Guangzhou is now operational. The plant, which is a result of about $4 billion, will be customized to roll out panels over 42-inches. It is the world's biggest panel plant in terms of size and investment.
The complex employed 1,500 as of July. The facilities are on a 330,000-square-meters tract. LG was given of 2 million square meters by China to build its LCD cluster.
"China is the world's biggest TV market. Our advanced display plant in the southern Chinese city is operational. LG still sees that the Chinese market has further growth potential because the demand for premium TVs remains strong. LG can't afford to lose the opportunity," a company statement said.
China led in global TV demand last year by revenue, with the country taking up 29.4 percent. North America was the runner-up with 20.1 percent, followed by Western Europe with 13.8 percent, according to an analysis by DisplaySearch, a market research firm.
By the second quarter of this year, LG was the biggest display supplier in large-sized panels mostly being used in televisions, globally, with a share of 25.2 percent, followed by Innolux of Taiwan with 20.2 percent, said the researcher.
LG applied cutting-edge glass-cutting technology at the plant. It is optimized to cut sheets of 55-, 49- and 42-inch panels.
Higher generation plants use larger glass substrates to make LCD panels, which boosts output and lowers manufacturing costs. LCDs are the screens used in everything from mobiles to televisions.
Experts earlier predicted a trend in which flat-panel TVs keep getting bigger. China has become the major driving force in the market with TVs measuring more than 40 inches being the most popular.
"The initial inputs of the plant would be 60,000 glass sheets, monthly. By 2016, the facilities will reach a monthly maximum of 120,000 sheets," said the statement.
Collaboration, tax incentives
The Guangzhou complex is a result of closer cooperation with the Chinese authorities and leading TV manufacturers there, as the LG affiliate pursues localized business strategies.
Out of the total investment in the plant, China was responsible for 20 percent, followed by Skyworth, a long-time partner of LG and China's top TV producer, with 10 percent.
"The Guangzhou plant is with our major Chinese clients," said LG spokesman Lee Hyung-kook. The products produced by the plant will be shipped to other leading Chinese consumer electronics companies such as Konka based in Shenzhen and TCL in Huizhou.
Such regional advantages will help LG save costs in logistics and workforce, strengthening its overall cost competitiveness.
Beijing guarantees tax and administrative benefits in return for inviting technology-driven Korean companies as the LG Group of affiliates, including LG Display, have been regarded as reliable foreign investors over the decade.
The two sides found common ground about tax benefits, among other things, to get LG to invest there. LG will hire more Chinese to operate the plant, which will be helpful in boosting the local economy.
Localization, therefore, is the key word for LG and it is ready to mass-produce premium screens to awaken idling demand for pricey electronic devices from affluent Chinese consumers.
The LG statement said that the plant shows LG's commitment to consistently pursuing localized business strategies in China to guarantee on-time delivery, output commitment and even better pricing.
LG already operates display module plants in other Chinese cities in Nanjing, Yentai, as well as Wroclaw of Poland and Reynosa of Mexico.
"As we realized a 'vertical integration' from modules to panels thanks to the operation of the Guangzhou plant, our business in China will keep running," said a spokesman.
Eco-system, no tech leaks
The Guangzhou complex isn't just another manufacturing facility that LG added as LG Display aims to create a new LCD value chain system by bringing its Korean suppliers.
Unlike the plasma panel business, the LCD industry needs to be backed up by a lot of equipment and materials suppliers, which are positioned well for "chain effects" to other related industries.
For "shared growth" between larger conglomerates and Korean small and medium-sized enterprises (SMEs), LG joined hands with six suppliers, including a local materials company ENF Technology.
The LG spokesman Lee said it's been in talks with several other Korean suppliers for closer cooperation in business projects in China.
"When LG built a module plant in Guangzhou back in 2007, we've partnered with 10 Korean partner companies. As the LCD industry is enabled to create a value chain from parts to finished goods, LG will invest more on co-prosperity," he said.
For example, LG Display is communicating with Chinese authorities to help its Korean partners receive what company officials say is "substantial support" for electricity and real estate in shorter periods of time.
"We can't do it alone. Because LCD products are the artworks with a combination of technology, workforce, investment and closer cooperation with partners, LG's competitiveness in the industry lies in support and partnership with our Korean partners," said the spokesman.
As LG plans to invest more in that panel plant according to market situations, local suppliers will sell more equipment, helping them strengthen their bottom line.
Chinese authorities are serious about limiting pollution as past efforts have stumbled on the altar of economic growth.
Given the weight of social pressure on the ruling Communist Party to do something about pollution, Chinese authorities are asking foreign companies to abide by strengthened regulations on the environment.
LG Display's Guangzhou plant has met those requirements. Its key manufacturing processes were authorized and LG said it's unlikely that the plant will raise environmental issues anytime soon.
The affiliate also plans to actively take on labor-related issues as major South Korean technology companies are becoming sensitive about updates of working conditions of their suppliers in overseas countries, such as those in China, as they hire workers via those contract suppliers to manufacture goods.
An LG Display official said the company will strengthen its hiring process not only at its manufacturing facilities but also its contractors to prevent any recurrence.
"LG takes labor-related issues very seriously and in any case, it shouldn't be allowed to hire 'underage personnel' at our factories and those of our parts suppliers," he said.
