S. Korean firms' transfer of LCD equipment to China

South Korean flat panel makers' possible transfer of the latest liquid crystal display (LCD) equipment to China will likely pose both benefits and shortcomings, a market researcher said Friday, as China moved to grow its domestic industry. Industry sources earlier said South Korean tech behemoth Samsung Electronics Co. will likely upgrade its new liquid crystal display (LCD) plant to an 8.5-generation one, indicating that it will use more recent and advanced technologies to produce LCD panels in China. Its homegrown competitor LG Display Co. had planned to build an 8th-generation factory in China. Such moves could lead to a variety of potential benefits as well as negatives for the South Korean manufacturers, said DisplaySearch. "Both companies continue to stress the importance of building LCD front-end fabs in China to be close to customers in the world's largest TV market and to mitigate risks of future cell import tariff increases," said Charles Annis, vice president of manufacturing research for DisplaySearch. A fab, or a semiconductor fabrication plant, is a facility where semiconductor devices are manufactured. "If tariffs do increase, cells made in China for sale in China will have lower costs than those made in Korea for sale in China," he said. "If manufacturing locally in China is a must, the rationale for transferring recently installed equipment is to enable more competitive utilization of tools that are now idling as a result of the current oversupply." Annis, however, added that the main reason the "Move to China" strategy could be difficult to pursue is that the South Korean panel makers might have contracts in place with their Chinese partners that require them to buy new machines for their planned fabs in China, which could burden them with additional costs. DisplaySearch said it would be the first case in the industry of transferring almost new machines from a fab in one country to another, if the two South Korean makers actually transfer their latest equipment.