China screen makers catch out leaders

Mainland flat-screen makers, once dismissed as second-class players in the global LCD market, are drawing envious looks from big names such as LG and Samsung.

While the Korean giants were busy developing next-generation organic light emitting diode (OLED) televisions, mainland companies have started selling ultra-high-definition (UHD) displays that are sharper than the standard LCD but cheaper than OLED.

Until last year, the UHD market had been almost non-existent, with just 33,000 sets sold in the 200 million-unit LCD TV market. Since then, shipments have soared around 20-fold, data from research firm IHS shows.

The risk for OLED is that UHD may become mainstream, with long-awaited cheaper OLEDs arriving too late to displace it, analysts say.

OLED's long-term potential is huge: ultra-high-resolution, screens thin enough that they could conceivably be curved or even rolled up, and so on.

But its slow introduction into the market and high prices have thrown open a window of opportunity for UHD makers, in this case mainland companies like BOE Technology and China Star Optoelectronics Technology, a unit of China's biggest TV maker TCL.

On the mainland, 55-inch UHD models sell for about US$1,800. By contrast, an OLED TV of similar dimensions sold by Samsung costs around US$10,000.

"[I] have to admit that we hadn't fully appreciated the potential of the UHD market," LG Display's chief executive Han Sang-beom said recently. "We assumed it'll be too early for this type of display to take off, and thus didn't think much of having diverse UHD product line-ups, especially in the low end. But I think we are not late just yet and we are working hard to lead the market here."

Mainland UHD makers are enjoying the fattest margins in the industry.

In the second quarter, Shenzhen-listed BOE reported an 8.9 per cent operating profit margin, while China Star posted a 9.6 per cent margin.

By comparison, Japanese flat-screen pioneer Sharp reported a razor-thin 0.5 per cent margin. LG Display, the world's No1 LCD maker, posted a 5.6 per cent margin.

Samsung Display had a margin of 13 per cent, the biggest in the industry. But excluding its fledging OLED business, its LCD margin is between 3 and 7 per cent, according to a Bernstein forecast.

Jolted by the reality of a growing UHD market, Samsung unveiled a 110-inch UHD TV in January. Interestingly, they were not made by Samsung Display, but were produced by Taiwan's AU Optronics.

BOE is now planning to raise 46 billion yuan (HK$58 billion) in the biggest mainland equity offering this year, to build panel production lines and increase its stake in its LCD venture, BOE Display Technology.