Mainland efforts to catch up with South Korea and Taiwan in the liquid crystal display (LCD) sector could prove expensive for Chinese companies hoping to establish themselves as industry players. At least two mainland companies have announced plans to build fifth-generation thin film transistor (TFT) LCD plants, in Shanghai and Beijing. There is speculation a third project may be announced soon in Shenzhen. Television manufacturers such as Konka and TCL are also reportedly interested in setting up LCD plants, which would help reduce mainland dependence on foreign suppliers. But market watchers say the investments are fraught with risk - a fifth-generation plant costs as much as US$2 billion. Furthermore, mainland companies lack the technology know-how and must partner with a foreign firm. 'Currently, TFT panels are too risky ... because the investment is too huge. It's a very dangerous game for Chinese companies,' iSuppli analyst Byron Wu said. He said mainland companies getting into this sector should find a foreign partner to help defray costs. South Korean and Taiwanese manufacturers supply most of the world's LCD panels. Chinese companies use the panels in making flat-panel televisions and computer monitors, taking advantage of low-labour costs on the mainland. An industry shortage, however, has forced mainland producers to scramble for supply. In its interim results last week, Proview International reported a 42.1 per cent year-on-year jump in LCD computer-monitor shipments to one million units. 'If there hadn't been a shortage of LCD panels, Proview could have shipped more LCD monitors,' LiberResearch analyst Kelvin Cheng said. Several companies believe the mainland could leverage its strength as a low-cost assembler of televisions and monitors into the production of LCD panels as well. SVA-NEC, a joint venture between a state-owned company and the Japanese electronics giant, is building a fifth-generation TFT-LCD plant in Shanghai, scheduled to begin production in October. The plant will turn out glass substrate measuring 1,100mm by 1,300mm and have a monthly capacity of 52,000 sheets per month. One sheet can be cut into three rows of five 15-inch panels, suitable for computer monitors, or two 20.1-inch panels for televisions. BOE-Hydis has plans for a fifth-generation line in Beijing. The plant is scheduled to begin operations in the first quarter of next year, with a monthly capacity of 45,000 sheets per month. The companies are positioning themselves for explosive demand growth in the Chinese flat-panel market. According to iSuppi, mainland shipments of LCD televisions are expected to reach 752,000 units by 2007, up from 87,000 last year. Although there is a dearth of LCD panels, with several producers raising prices, the supply imbalance will not last as advanced sixth and seventh-generation lines under way in South Korea and Taiwan come online. 'There's enough capacity coming, so China doesn't need to build its own industry,' said Siegfried Trinker, director of corporate strategy at LG.Philips Displays, which made about 25 million cathode ray tubes (CRT) at its Nanjing and Changsha plants last year. Mr Trinker noted South Korean, Taiwanese and Japanese LCD makers had more than 20 years of experience and a broad pool of engineers to rely on. 'You need a cluster of industry knowledge.' He said CRT televisions would continue to dominate the price-sensitive mainland market: about 85 per cent of the televisions sold in China are cheaper than US$350. The mainland CRT television market is forecast to reach 37.52 million units by 2007, up from 31.84 million last year. LG.Philips Displays expects output at its mainland plants to climb 5 per cent this year as rising incomes make televisions affordable for first-time buyers. 'As soon as people have the money, they will purchase a TV,' Mr Trinker said. In addition, replacement demand is expected to account for a greater portion of overall sales as Chinese consumers throw out ageing televisions. But the day when flat-panel screens completely replace CRT models was a long way off, Mr Trinker said, and would not come until 'you can buy a flat-panel for the same price'.