LG Philips LCD announces US$5b investment despite output glut
LG Philips LCD is to invest five billion dollars in new facilities to produce next-generation flat panel displays in order to strengthen its global market leadership.
The company said it would invest 5.29 trillion won (five billion dollars) in building a "seventh generation" TFT-LCD fabrication plant in Paju, some 30 kilometers (20 miles) north of Seoul by early 2006.
Production at the plant will start sometime in the first quarter of 2006, using 45,000 input sheets of "mother glass" every month that will gradually rise to 90,000 depending on market conditions.
Each mother sheet can produce eight 42-inch TFT-LCDs or six 47-inch wide TFT-LCDs used primarily for flat panel TVs and large monitors.
The group's huge capital expenditure comes at a time when LG Philips LCD faces falling profits amid a supply glut and weak prices as competitors from Taiwan flood the market with low-priced products.
"This is a strategic investment aimed to strengthen our hold in the market in a few years time," said Kim Jae-Sam, a LG Philips LCD spokesman.
LG Philips LCD is a 50-50 joint venture between South Korea's LG Electronics and Dutch conglomerate Philips.
"The life cycle of flat panel displays is so short that we must get a head start over the competition to stay ahead," Kim said.
Analysts said the timing of the large-scale investment appeared to be right.
"Paradoxically, when the market is in a slump, it might be the best time for increasing capital expenditure to prepare for a recovery in demand in a year or two," said Bae Seung-Chul, an analyst at Samsung Securities.
He noted that South Korea's Samsung Electronics, the world's leading semiconductor-maker, had greatly increased its market share over Japanese and European competitors by investing aggressively at a time of market slowdown.
