TELEVISION manufacturing giant Luks Industrial will increase the proportion of local components in its products to more than 80 per cent from the existing 30 per cent by forming a joint venture with China's largest television tube maker.
The venture will be achieved by selling a 49 per cent holding in each of the group's two Shenzhen plants to Xianyang-based Cai Hong Television Tube Plant.
Luks chairman Luk King-tin said he expected the deal to involve about 100 million yuan (about HK$135 million).
A mainland accounting firm is currently assessing the net asset values of the plants.
The plants, Luks Industrial (Bao'an) and Luks Industrial (Shekou), will be renamed to reflect the Cai Hong interest.
The acquisition meant Luks could now use Cai Hong's television tubes, Mr Luk said, noting that the tubes made up 40 per cent of production costs.
''The use of local tubes will thus greatly reduce production costs,'' he said.
The venture would minimise the effect of increased costs and tariffs on imported components brought about by the depreciation of the yuan.
He noted that tariffs on imported components were about 20 per cent.
Local sourcing would also reduce transport costs.
''We hope this will help increase the volume we are allowed to sell in China,'' he said.
Mr Luk added that products with a higher proportion of local components had a better chance of getting rights to a greater share of domestic sales.