Hon Hai, Sharp mull massive Chinese LCD TV panel plant

Hon Hai Precision Industry and Sharp are thinking about constructing one of the world’s largest LCD factories in China, aiming to leverage the former’s cash and the latter’s technology to compete more effectively against global rivals.

The Taiwanese contract electronics manufacturer, better known as Foxconn, and Japanese subsidiary Sharp intend to begin low-cost mass production of liquid crystal display panels for televisions as early as 2019. While the project would likely be partly subsidized by local governments, the total investment could exceed 800 billion yen ($6.95 billion).

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The two companies are eyeing Guangzhou as the plant site but are likely also negotiating with other municipalities in a bid to pay less by building in whatever location offers the most generous support. They are also in talks with production equipment makers.

Foxconn and Sharp produce TV panels through joint venture Sakai Display Products and Taiwanese Foxconn unit Innolux as well as at Sharp’s Kameyama No. 2 plant in Japan. Sakai Display operates a plant using massive 10th-generation glass substrates for more efficient production. The new Chinese facility would work with even bigger substrates, using Sakai Display’s experience to hold down costs and make the panels more price-competitive.

Hon Hai and Sharp hold roughly 20% of the global TV panel market, putting them in third place, behind South Korea’s Samsung Electronics and LG Display. In China, BOE Technology Group and Shenzhen China Star Optoelectronics Technology are building big LCD plants, with support from regional governments, that are due to go online around 2018 or 2019.

Adding the Hon Hai-Sharp plant to the mix would exert further downward pressure on panel prices, making the proposition potentially risky. Sharp’s massive investment in the Sakai plant backfired, leaving the company in such dire financial straits that it had to be bailed out by Hon Hai.

Hon Hai is expected to provide the bulk of the funding for the TV panel plant, while Sharp would apply technology it has already developed. This project would likely enable the two companies to recoup their investment faster than from their OLED panel project as well as better exploit synergies between them.

OLED panels, which use organic light-emitting diodes, are seen as the next generation of smartphone displays. Sharp has decided to set up a prototype production line in Japan and is considering a mass production line in China. But Sharp needs to consider the timing of this investment carefully. The South Korean competition has gotten the jump on the Japanese company, which still faces high technical hurdles to mass production.