LG Bets Display Future on Paju Cluster
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By Kim Yoo-chul Staff Reporter PAJU, Gyeonggi Province - South Korean conglomerate LG Group relies on consumer electronics products and high-tech components as its bread and butter. And the group's liquid-crystal display (LCD) manufacturing cluster here is now emerging as the heart of its future business strategies. LG plans to invest around 8 trillion won (about $6.9 billion) through 2018 in its Paju complex, which is providing the manufacturing engine for affiliates LG Display, LG Chem and LG Innotek. LG Display, the world's second-largest flat-panel maker, is using its Paju factories to produce LCD panels for televisions, mobile phones and other devices. LG Chem, the country's biggest chemical company, is the leading maker of LCD glass substrates, while LG Innotek is using its Paju lines to produce light-emitting diode (LED) chips and modules. "The investment plan through 2018 is part of the group's plans to 'vertically integrate' LCD-related businesses," an LG Group official said during a press tour of the Paju cluster, last week. Improving cohesion in its display-related business will improve the synergies among its components and consumer electronics units, while also reducing cost and enhancing production efficiency, the LG official said. The group's investment in the Paju LCD cluster, which opened in 2004, was 9 trillion won by the end of last year, according to the data given by the group. LG Display will provide around 3.8 trillion won of the additional investment, including 3.2 trillion won to enlarge its "eight-generation (8G)" line by the end of next year. The company is also building a fourth low temperature polycrystalline silicon (LTPS) production line, which will be used to produce small-sized LCD displays used for "smart" phones and other mobile devices. LG Chem will spend 3 trillion won to construct seven more LCD glass production lines, looking to raise its total capacity in glass processing to over 5 million square meters by 2018. LG Innotek will spend 1.15 trillion won by the end of 2010 to improve its LED production lines. "Aggressive investment and faster integration will allow us to gain a stronger growth momentum. Our investment in the Paju cluster will manifest itself around 2013, when we expect the 'capitalization effect' to take hold," the LG official said. Competition With Samsung in Mind LG's aggressive investment in its display business is seen as a direct attack against Samsung Electronics, which has the upper hand in the flat-screen business. LG believes it has the technology and production capacity to compete with Samsung, and is now ready to steal clients away from its bitter industry rival. LG Display has been gaining on first-place Samsung in LCD panels in recent years, while LG Chem is competing with Samsung Corning Precision in the LCD glass segment. "LG Display and LG Chem are better positioned to compete with Samsung in LCD-related businesses. The key point will be LG Innotek. More of the group's energy needs to be focused on Innotek to boost its capability in producing LED chips," Park Young-joo, an analyst at Woori Investment, said. Although LG Display is the first mover in China of its LCD panels, LG Electronics has still been in the initial phase in the rapidly growing global "LED TV" market. Under the corporate structure, LG Electronics produces LED TVs with the panels from LG Display, and the related backlights and chips provided by LG Innotek. |
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