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SCMP Reporter

Flat-panel display (FPD) specialist Photon Dynamics is expanding in China, banking on the rapid growth in electronics manufacturing services in the mainland.

The Silicon Valley-based firm will establish a wholly owned foreign enterprise in Shanghai and a demonstration facility in Suzhou this month.

Founded in 1986, the company supplies FPD makers with software and test, inspection, repair and maintenance systems.

It has more than 10 large clients on the mainland, including operations run by electronics manufacturing contractor Flextronics and joint-venture production facilities of other multinational enterprises.

Photon Dynamics chief executive and president Vincent Sollitto said: 'This enterprise will support our growing and expanding customer base with the ability to sell domestically in China. Our customers in the mainland require an established foreign business infrastructure with a reputable international presence and commitment to China.

'Our new enterprise demonstrates this commitment and will provide a wealth of technical leadership and expertise.' Financial details of its China expansion plan were not disclosed.

At present, Photon Dynamics provides customer support services from its sales offices in Beijing, Shanghai and Suzhou.

Asia-Pacific vice-president Les Barkley said the expanded operations in Shanghai and Suzhou were expected to help grow employment opportunities in these cities, with jobs that range from engineering and advanced research to direct sales and other trade-focused fields.

Mr Sollitto earlier predicted the mainland could provide a cost-effective infrastructure to support new factories for Generation 5 glass substrate, the largest form of liquid crystal display (LCD) at up to 1,200mm by 1,250mm.

This new standard for LCD substrates enables manufacturers to double the number of displays produced at one time on a sheet of glass. Global demand for FPDs, a high percentage of which is for thin-film transistor LCDs, has increased during the past several years as prices declined and their use became more ubiquitous.

Research firm DisplaySearch forecast about 45 investments in FPD production lines would have been placed between last year and the first half of next year in anticipation of a supply shortage.

Mr Sollitto said the world market would need 50 to 75 Generation 5 factories to come on stream during the next few years to meet growing demand.

He said an increasing number of electronics contract-manufacturing companies and LCD makers were already shifting their production and final assembly operations to China.

These enterprises saw several advantages to manufacturing in China, including highly competitive wage rates, identified export hubs for technology products, and a large concentration of original design and electronics parts manufacturers for the mainland market. Recent Chinese market estimates show that 394,000 notebook computers were sold on the mainland during the first half of the year, up 42.8 per cent from the same period last year.

By next year, China's annual notebook production was projected to reach from 15 million to 18 million units a year to make up about 80 per cent of the world's total yearly notebook manufacturing output.

In addition to their use in notebook and desktop computer monitors, FPDs are integral parts of television sets, mobile phones, vehicle dashboards, home entertainment systems, personal digital assistants and projection equipment. DisplaySearch forecast worldwide sales of FPDs to average 21 per cent a year and turn into a US$57 billion industry by 2006. Although the economic downturn prompted global FPD sales to fall 9 per cent and hit US$22 billion last year, the market was expected to rebound this year and grow 37 per cent to US$30 billion.

Mr Sollitto expected the major LCD manufacturers in South Korea, Japan and Taiwan to increase investments in China from display-module assembly to full-scale production.

The company also announced a deal to buy the Rapid Thermal Processing portion of a flat-panel display capital equipment business. Intevac will sell Photon its Rapid Thermal Processing technology used in manufacturing flat-panel displays for US$20 million and assumption of certain liabilities.

The news came as the company announced its financial results, saying revenues for the fourth quarter of fiscal 2002 increased by 77 per cent to US$18.4 million compared with US$10.4 million for the fourth quarter last year.



Photon Dynamics lifts China image