China's fourth largest TV maker, Changhong Electric Co Ltd, has acquired Seoul-based flat-panel display maker Orion PDP to move onto the upper level of the television production value chain, according to the National Development and Reform Commission.

 

The commission said on its website that Century Shuanghong Display Devices Co Ltd, an 80-20 joint venture between Changhong and the biggest Chinese color TV tube maker Irico Group, had acquired 75 percent of Sterope Investments BV in the Netherlands for US$99.9 million. The Dutch firm holds the South Korean firm Orion PDP.

 

The acquisition is the second of a South Korean electronics firm by a Chinese company in the past four years. The deal shows an increasing interest by Chinese firms in buying electronics businesses for their technology.

 

And smaller South Korean electronics firms facing mounting pressure from dominant players like Samsung Electronics and LG Electronics are choosing to be bought rather than compete in the market.

 

In 2003 the Beijing-based BOE Technology Group acquired the loss-making FTF-LCD unit of South Korean counterpart Hynix for US$380 million.

 

"Orion is just a second-tier player in the plasma display panel (PDP) market and with the consolidation trend going on, it has to choose to team up with other firms," said Yang Lei, a flat-panel display analyst with CCID Consulting Co Ltd, a domestic electronics industry consultancy. Yang said the deal allows Changhong to extend its reach into the higher end television manufacturing industry.

 

Changhong's shares on the Shanghai Stock Exchange fell by 2.2 percent to 4.01 yuan (51 US cents) yesterday while those of Irico rose by 1.06 percent to 2.85 yuan (36 US cents). Sichuan-based Changhong is one of the few Chinese TV makers with a strong presence in the PDP market while other firms are concentrating on LCD TV sets.

 

PDP TVs normally have bigger screen sizes. But with an abundant panel supply and quick technological progress the LCD TV sets are setting the trend. 

 

According to the Ministry of Information Industry, the Chinese TV makers produced 5.9 million LCD TV sets in the first nine months of this year. This is 136 percent higher than the same period of 2005. Only 482,000 units of PDP TV sets were made, which is 13 percent lower year-on-year.

 

The change in the market affected Changhong's performance. In the first half of 2006, while its other two business lines in white goods and IT products both rose year-on-year, revenue for its TV-dominated dark appliance business -- accounting for more than half of the company's total -- fell by almost 10 percent over the same period in 2005 to 426 million yuan (US$54.4 million).

 

Yang with CCID Consulting said the acquisition would allow Changhong to have a stable panel supply and benefit from cost reductions.

 

In October both Changhong and Irico sharply lifted their investment in Century Shuanghong from 2 million yuan (US$255,349.6) to 1.8 billion yuan (US$229.8 million) and started plasma panel production.

 

(China Daily December 14, 2006)