industry news

China’s JV’s Abound—TPV to Purchase Philips TV Biz

From Europe, Japan and Taiwan, joint ventures are being formed with the Chinese—offering access to low cost labor, strategic manufacturing zones, relief from high import tarrifs and access to the world’s most populous market. Here’s a rundown of some of the more recent joint ventures with major Chinese companies and some production plans going forward.

The most significant news was the announcement that TPV Technology (Hong Kong) a subsidiary of BOE ( Beijing China) (www.boe.com/cn) plans to purchase both the monitor and flat-screen television businesses from Philips. The price, $358M with the deal expected to be completed in July.

This marks the second time a Chinese TV manufacturer has purchased TV assets from a European CE giant. In July of 2004 leading China based TV manufacturer TCL, announced a joint venture with Paris based Thomson Electronics, which includes the RCA brand in the US (see Projection Monthly June 2004).

With the Philips acquisition, TVP said it expects to earn more than $1B of additional revenue this year after buying out its associate company Oriental Top Victory Electronics (OTPV) ( Beijing, China). The combined acquisitions will bring TPV $2B of revenue annually the company said.

TPVs parent company BOE is a multi-billion dollar “non-governmental enterprise” that was founded in April 1993 (when everything was a governmental enterprises in mainland China) and has since grown into a $1.7B conglomerate consisting mostly of non-Chinese “partner” companies wanting to do business in China. These include Korean multinational Hyundai and Japan’s Matsushita and Nissan. Products include consumer display electronics, software, semiconductors and precision components. According to company sources, before the purchase, parent company BOE is the second largest monitor manufacturer worldwide.

Worldwide TFT-LCD monitor shipments will rise from 67.5M units last year to 90.9M units this year and to 135.3M units in 2008, according to the Institute for Information Industry of Taiwan. TPV will increase its capital expenditure in this segment to $70M this year, to be spent mainly on a factory in Wuhan and one in Fuqing on the mainland.

Meanwhile, China CE rival TCL ( Shenzhen, China) (www.tcl.com), the largest TV maker in the world, produces mainly CRT models. The company shipped 21M sets last year and aims to ship 24M TVs this year. In related news, the company reportedly has aligned itself with four chip and projector giants: Intel, Texas Instruments, InFocus and Genesis, according to the Jinghua Times.

TCL recently said it purchased more than NT$2B [$64M] worth of display products from Taiwan, according to the Chinese-language Economic Daily News. Taiwan based Chunghwa Picture Tubes (CPT) and Chi Mei Optoelectronics (CMO) are among the suppliers. CPT currently ships 150-200K CRTs to TCL per month, while also shipping 15- and 20-inch modules for LCD-TVs and 46-inch PDP-TV panels.

TCL said it will expand its TV offerings to include DLP front- and rear-projection TVs (see China RPTV coverage this section). The company currently runs four R&D centers in: Indiana; Villingen, Germany; Shenzhen and Singapore.

In another Chinese joint venture, this time between SVA Group (Shanghai, China) (www.sva.com/cn) and Japanese giant NEC (Tokyo, Japan) (www.nec.co.jp) reported they plan to invest an additional $500M to raise capacity at their China-based LCD joint venture, despite recent low prices impacting margins, according to the Asia edition of the Financial Times.

The new investment is expected to raise capacity by 70% to nearly 90K LCD panels a month by June 2006. SVA has a 75% stake in the joint venture, and NEC owns the remainder.

SVA will reportedly build a second production line at the Shanghai plant by 2008, using 6 or 7G technology. The current line uses 5G technology. The Shanghai plant now produces PC-use panels for the Chinese market. It hopes to expand the LCD business in China by entering the market for TV panels.

According to a story in the Nihon Keizai Shimbun, this is part of NEC’s strategy to have its overseas operations make commodity-grade products, such as those for PCs, while its domestic unit focuses on higher-end products. In Japan, NEC plans to begin production of advanced LTPS LCD panels at its wholly owned subsidiary, NEC LCD Technologies, in October. NEC's global market share in large LCD panels was less than 1% for large panels, and 2% or lower for small and midsize panels in 2004.

Other Chinese investments are coming from Japanese manufacturer Hitachi ( Tokyo, Japan) (www.hitachi.co.jp) in a recent announcement it will spin off the R&D group at Hitachi China and rename it Hitachi ( China) Research & Development Corp. (HCR&D). This will be wholly capitalized by Hitachi China at $6M. The new company is expected to help Hitachi develop business in China, as well as create new products for the world market by utilizing R&D power and human resources in China. The company will be launched with 80 employees, with plans to boost the company's size to 120 employees in 2006, according to NE Asia Online.

The company said they want a piece of the large-screen TV market in China and will work to meet growing local demand approaching the 2008 Summer Olympic Games in Beijing. Hitachi is aiming for 20% share in the near future. In addition to existing bases in five major cities, including Beijing and Shanghai, Hitachi plans to set up new sales bases in 15 Chinese cities by the end of the year, before expanding the network to 32 cities in 2006, according to The Nikkei Business Daily. The company will also change its marketing approach in China, providing product directly to department stores and volume retailers, rather than through local sales agencies and other intermediaries.

Hitachi currently lags behind Matsushita in the Chinese market for PDP-TVs, even though it enjoys a leading market share for the sets in Japan. However, Hitachi will boost its local production/sales base in Fuzhou, Fujian Province and expand production of PDP, projection and other large-screen TVs, raising Hitachi's monthly plasma TV capacity in China to 5K units in 2006, up from 1K last year. The company aims to boost PDP-TV sales in China six-fold this year, up from 10K in 2004, in a move meant to grab the top market share.

Monthly projection TV output capacity will increase to 15K units, up from 10K last year (see related China RPTV story this section). This follows Hitachi's announcement last October of a plan to boost earnings in China by 10% or more annually by the end of 2006.

Finally, Taiwan’s Tatung ( Taipei, Taiwan) (www.tatung.com.tw) announced plans to expand into China. The company said it is expanding its PDP- and LCD-TV assembly lines at a Wujiang, China plant, and the company aims to ship a total of 500K flat-panel TVs this year, according to DigiTimes.com.

Tatung will add three assembly lines for PDP- and LCD-TVs, and the company plans to shift all production from Taiwan to China following the expansion. Tatung expects its own-brand PDP-TV shipments to double this year to more than 200K units, while its own-brand LCD-TV shipments will increase to 150K units. When OEM shipments are included, the company gets to the 500K units mark.

For LCD-TVs, Tatung will continue focusing on ODM production in China rather than introducing its own branded product to that market. In the European and US markets, Tatung will only supply SKD (semi knocked down) products, as tariffs remain a concern.

The company will also roll out a new 37-inch LCD-TV model during the third quarter. However, Tatung has no plans to launch any new PDP models, as it already offers 42-, 46- and 50-inch inch products. The Wujiang plant currently has five LCD monitor production lines, with monthly shipments of about 300K units. Over 80% of the capacity is allotted to 17-inch LCD monitor production, as 19-inch LCD monitor production still remains limited.

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Insight Media
Annmarie Gabisch, 203-831-8564
annmarie@insightmedia.info