AOC $2 billion 300 million orders behind the scenes: BOE overweight Corelle

Yukui for 2005 amounted to 1 billion 600 million yuan BOE (000735.SZ), AOC $2 billion 300 million out of order and meaning.

In February 8th, BOE announcement, said the company in January 1, 2006 and subordinate shareholding enterprises AOC Technology Company Limited (0903.HK) signed the "framework agreement" panel order, AOC technology will continue to purchase from the BOE LCD and TFT-LCD TV panel in the next three years, is expected to the year 2006, 2007, 2008 respectively, the highest annual purchase amount for $600 million, $700 million, $1 billion.

A day earlier, the foresight of the capital market act in advance, the BOE shares the same day limit. Days card investment observers Zheng Min analysis, the BOE in 2006 urgent need for strong measures to turn losses, and AOC technology reached a huge order agreement for three years, will help them more large-scale release of production capacity and ensure profitability.

But in the LCD industry, it seems, BOE announcement is not so simple.

Corelle investment

"AOC's orders are related to Corelle's investment." The LCD industry bluntly.

At the beginning of this year, the world's largest LCD glass substrate supplier Corelle said in an interview, the company's board of directors has approved funding for the establishment of a new liquid crystal display in China, (LCD) glass substrate finishing process.

Glass substrate is the liquid crystal panel upstream raw materials, the cost of the LCD panel 60%-70%. With the BOE, SVA have invested in building a production line of photoelectron, immediately become a fight for Corelle on both sides of the two protagonists of the nearest location.

And on February 7th, Shanghai claimed that Corelle's $1 billion production line has been basically established in shanghai.

Stable bulk orders is an effective guarantee for future sales revenue, so the company can have more resources and energy into capacity expansion. To attract the upstream enterprises such as Corelle to achieve the industry convergence effect, the monthly production capacity of 100 thousand is essential." BOE display technology park, a production manager admitted that the current BOE is opening a number of favorable conditions for Corelle's glass substrate production base can be settled in science and technology park. However, if you can not go on the production capacity of the BOE, just a preferential policy is to attract those who do not go upstream and downstream industry chain.

Why Corelle site for domestic TFT-LCD companies so important? Researchinchina analyst Zhou Yanwu said that in the whole TFT-LCD industry chain, mainly comprises a glass substrate, color film, color filter materials such as glass substrate of the liquid crystal panel, while the cost is very low but it is the most key. Among the hundreds of glass manufacturers in the world, only 4 can produce glass substrates, in addition to Corelle, the other 3 are Japanese manufacturers. Due to the company's strategy and the local government to prevent leakage of technology policy, the production of Japanese and Korean manufacturers is very small. Asahi probably accounted for 30%-35% of the global output, the share is basically a monopoly by Corelle.

BOE, a senior executive admitted that the current BOE glass substrate all from imports, the cost of light packaging will be more than 5%, and the transport process is complicated, reduce costs is necessary to do the work. But the cost should be reduced, you must put the LCD panel main parts of the world's most important manufacturers are attracted to the BOE around in order to achieve the industrial aggregation effect, thereby reducing the cost in the whole, and realize technology exchange and collaboration effect. "And attract a large number of supporting manufacturers gathered a basic condition is a large scale of production and marketing." The executives said.

With AOC technology and other leading downstream supply and marketing enterprises, as well as the upstream supply of raw materials for the polymerization of the enterprise, so that the BOE in the downstream industry gathered on the other domestic enterprises to take a step forward." The BOE display technology park executives said, the science and Technology Park currently has 16 international well-known manufacturers to set up factories, a total investment of more than $600 million, is expected by the end of 2006 TFT-LCD BOE five generation line local matching rate up to 85%.

AOC grab

In the first half of 2005 is the lowest point of the TFT-LCD industry, Taiwan's five manufacturers all lose money, lost nearly $about 30000000000 NT, the highest one lost 9 billion." At the end of 2005, the results of the briefing, the board of directors of the board of Taiwan, Wang Dongsheng, as an example to explain the cyclical industry downturn. But the king said in 2006 promising market prospects for investors, "the current TFT-LCD prices situation has bottomed out, the main products of company appeared in more than 10% of the price rise. BOE just can take advantage of a good opportunity to pick up the market, the rapid expansion of the amount of production, expand market share."

Zhou Yanwu believes that in 2005 although the LCD panel companies have suffered different degrees of loss, but these enterprises now finally look forward to a good time: PC CRT display large-scale upgrading to TFT-LCD, and the growth of digital high-definition large screen LCD TV explosive.

But Zhou also pointed out that the relationship between TFT-LCD manufacturers and downstream customers are usually very fixed, the two sides signed a contract is generally five years for a cycle, the elderly reached the age of ten years. For example, IBM and LG- PHILPS signed a 10 year supply relationship, LG- PHILPS recently acquired HP's $5 billion order for $3. Downstream manufacturers once identified TFT-LCD suppliers, in general, will not be replaced. Therefore, it is particularly important to obtain sustainable and stable bulk orders for the survival and development of TFT-LCD manufacturers