BEIJING --(Business Wire)-- CCID Consulting, China's leading research, consulting and IT outsourcing service provider, and the first Chinese consulting firm listed in Hong Kong (Hong Kong Stock Exchange: HK08235), released its article on China's LCD industry.

China enters a period of peak investment in advanced-generation LCD panel production lines Investment in LCD panel production lines in China is gathering pace and more and more advanced-generation production lines are now being built. All signs show that China has entered a period of peak investment in the LCD industry. In September 2009, BOE held a cornerstone laying ceremony for its 8G TFT-LCD panel production lines in Beijing Economic-Technological Development Area (BDA), symbolizing the formal entry of LCD panel production lines onto the advanced-generation lane in China. In the same month, Sharp (News - Alert) officially announced that it would sell its 6G product line (including production line equipment and technology) to Nanjing CEC-PANDA. This is the first >5G LCD panel production line a foreign vendor has ever transferred into China. Also in September, the world's second largest LCD panel vendor LGD announced that it has reached a preliminary agreement with Guangzhou Economic and Technological Development Zone over investment in 8G TFT-LCD panel production lines there. This will make LGD the first foreign company to invest and build advanced-generation panel production lines in China.

In fact, this high tide of LCD panel investment started as early as in 2008. The invested TFT-LCD panel production lines cover all generations, including 4.5G, 5G, 6G, 7.5G and 8G. The investing enterprises include both traditional LCD panel makers in China, such as BOE, InfoVision Optoelectronics and Shenzhen Tianma and new entrant enterprises, such as CEC-PANDA and LGD. There are many factors which affect this round of high investment in LCD panel production lines. However, the market, policies, and the economy are the main driving forces.

Table 1 Investment in LCD Panel Production Lines in China Enterprise Technology Time ofinvestment Time ofBatchProduction ProductionCapacity ApplicationFields BOE 5G 2003 2005 85,000 pieces/month LCD display and Notebook PC 4.5G 2008 2010 30,000 pieces/month Products with a screen size of under 10 inch 6G 2009 2010 90,000 pieces/month LCD TV 8G 2009 2011 90,000 pieces/month LCD TV SVA-NEC (News - Alert) 5G 2002 2004 80,000 pieces/month LCD display and Notebook PC InfoVision Optoelectronics (IVO) 5G 2004 2006 30,000 pieces/month LCD display and Notebook PC 7.5G 2009 2011 90,000 pieces/month LCD TV Century 5G 2006 2008 60,000 pieces/month LCD display and Notebook PC Shanghai Tianma 4.5G 2006 2008 30,000 pieces/month Products with a screen size of under 10 inch Chengdu Tianma 4.5G 2008 2010 30,000 pieces/month Products with a screen size of under 10 inch Panda (Nanjing) 6G 2009 2011 80, 000 pieces/month LCD TV LGD (Guangzhou) 8G 2009 2011 80,000 pieces/month LCD TV Source: CCID Consulting, September 2009 With the continuous acceleration of color TV industry transformation, the LCD TV market will show explosive growth, thus rapidly driving up the LCD panel demand With the gradual replacement of traditional CRT color TV, the penetration of LCD TV has already become an irreversible trend. Also, the pace of penetration has been gathering. As the largest color TV manufacturing base and the largest color TV market in the world, China has also seen an explosive growth in its LCD TV output as its color TV industry undergoes a transformation process. CCID Consulting statistics show that 2005-2008, China's LCD TV output had a CAGR of 73.4%. In 2008, its LCD TV output reached 24.118 million sets.

Fig. 1 China's LCD TV Output, 2005-2008 http://www.ccidconsulting.com/upload/14587.jpg Source: CCID Consulting, September 2009 The explosive growth of LCD TV output has generated a big demand for large-sized LCD panels. China's LCD panel industry started rather late. The country only had its first 5G TFT-LCD panel production line in 2004. Until 2008, investment in China was only limited to <5G LCD panel production lines, far from meeting the domestic demand for LCD TV panel. The LCD TV panel market and the industry are seriously out of balance. This has also brought market opportunities for enterprises to invest in advanced-generation LCD panel production lines.

New industry policies from the central government and growing support from local governments are the new impetus for enterprises to make investment In recent years, China has stepped up its support for the flat panel display industry. In the national industry development plans and the special projects developed by the National Development and Reform Commission and the Ministry of Science and Technology, high attention and great support have all been earmarked for the flat panel display industry. In particular, the State Council listed "New display and color TV industry transformation" as one of six projects for key support in the Electronic Information Industry Restructuring and Revitalization Plan adopted in February 2009. Specific support has been promised for the construction of >6G LCD panel (TFT-LCD) production lines and for backbone color TV enterprises to improve their integrated module design and production capabilities. The introduction of the Plan has widened the range and raised the intensity of support for the LCD industry, thus strengthening enterprises' confidence in investing in LCD panel production lines.

On the other hand, local governments are also stepping up their layout in the flat panel display industry. In addition to formulating related preferential industry policies, they have also provided greater fund support for investing enterprises, thus lowering the investment threshold for the latter. This has become a new driving force for enterprises to invest in the LCD panel industry.

The impact of the global financial crisis has sped up the pace of LCD panel industry shift, providing a rare historical opportunity for China to greet such a shift Affected by the global financial crisis in 2008, the market demand for LCD panels fell sharply. Large-sized (>10 inch) TFT-LCD panel sales reached 432 million pieces worldwide, only up 8.5% from the sales of 398 million pieces last year, far below the 39.0% growth rate in 2007, setting the lowest growth record in the recent five years.

Fig. 2 Global Large-Sized TFT-LCD Panel Sales Volume and Its Growth Rate, 2005-2008 http://www.ccidconsulting.com/upload/14588.jpg Source: CCID Consulting, September 2009 Affected by the financial crisis, some well-known LCD panel vendors have encountered losses, and now face tremendous fund pressures. Under such particular conditions, panel makers have started to seek outside cooperation in order to achieve growth. This has led to a relaxation of restrictions on the exporting of advanced-generation LCD panel technologies. As the largest electronic product manufacturing base and the biggest electronic product market in the word, China has become the first choice for foreign LCD panel vendors to shift their production capacities. This has also provided a rare historical opportunity for the development of China's LCD panel industry.

The financial crisis has not only sped up the pace of transfer of the global LCD panel production capacity to China, but also created new opportunities for local panel enterprises to expand their investment. The financial crisis has resulted in a short-term surplus in LCD panel supply, and some big panel enterprises have reduced their production capacity and stopped production expansion, thus bringing heavy pressures on raw materials and equipment vendors at the upstream and a big drop in raw material and equipment prices. However, this precisely brings rare opportunities to China's LCD panel industry which urgently needs upgrading. By choosing to speed up investment in advanced-generation LCD panel production lines and in the core links of the industry chain at this time, local panel enterprises can greatly improve their bargaining power over upstream raw material and equipment vendors which are mainly foreign enterprises, thus lowering their investment cost.

Accelerate industry chain building, and achieve the sustainable and healthy development of China's LCD industry While making intensive plans for advanced-generation LCD panel production lines, China still lags relatively behind in the core links of the upstream industry chain, such as glass substrate, filter, polarizer, liquid crystal materials. This causes hidden dangers to the healthy development of China's LCD panel industry. Currently, the raw materials needed for making LCD panels are basically controlled in the hands of foreign vendors, which are basically in a monopolistic position. Chinese LCD panel vendors must rely on imported raw materials. This not only increases production cost, and foreign restrictions in the supply of upstream raw materials, but it also brings big risks to domestic LCD panel vendors. As competition in the LCD panel industry increasingly intensifies, domestic panel vendors' lack of any say in raw material procurement will weaken their market competitiveness.

Table 2 Leading LCD Panel Raw Material Suppliers in the World Raw Material Vendor Country/Region Glass substrate Corning (News - Alert) USA AGC Japan NEG Japan Filter DNP Japan Toppan Printing Japan STI South Korea Sintek Taiwan of China Allied Material Technology Corp.

Taiwan of China Polarizer LG Chem South Korea Nitto Denko Japan Samsung (News - Alert) Cheil South Korea Optimax Technology Corp.

Taiwan of China Daxon Technology Taiwan of China Liquid crystal materials Merck Germany Chisso Japan While greatly supporting investment in advanced-generation LCD panel production lines, China should therefore attach importance to industry chain building. Especially for the core upstream links of glass substrate, polarizer, filter and liquid crystal materials in the industry chain, the country should increase R&D inputs, establish mechanisms for collaboration between government departments, industries and universities and strengthen breakthroughs in core technologies. On the other hand, the government also needs to actively attract enterprises with certain technological accumulations to join in, formulate some preferential policies for them, raise their enthusiasm for investment and jointly push forward the healthy development of the LCD panel industry. The only way to truly make China's LCD panel industry more competitive is to establish a sound industry chain.

About CCID Consulting CCID Consulting Co., Ltd. (hereinafter known as CCID Consulting), the first Chinese consulting firm listed in the Growth Enterprise Market of the Stock Exchange (GEM (News - Alert)) of Hong Kong (stock code: 8235.HK), is directly affiliated with China Center for Information Industry Development (hereinafter known as CCID Group). Headquartered in Beijing, CCID Consulting has so far set up branch offices in Shanghai, Guangzhou, Shenzhen, Wuhan and Chengdu, with over 300 professional consultants after many years of development. The company's business scope has covered over 200 large and medium-sized cities in China.

Based on major areas of competitiveness: industrial resources, information technology and data channels, CCID Consulting provides customers with public policy establishment, industry competitiveness upgrading, development strategy and planning, marketing strategy and research, HR management, IT programming and management. CCID Consulting's customers range from industrial users in electronics, telecommunications, energy, finance, automobile, to government departments at all levels and diversified industrial parks. CCID Consulting commits itself to becoming the No. 1 advisor for enterprise management, the No. 1 consultancy for government decisions and the No. 1 brand for informatization consulting.

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