Chinese display producers, which have massively rolled out low-priced products to dominate the global liquid crystal display (LCD) panel market, are struggling as LCD panel prices have plunged. They cannot even survive without the Chinese government’s subsidies.
Chinese display companies, such as BOE, Caihong Group, GoVisionox (GVO), CEC Panda, posted poor results in the first half of this year due to lower LCD prices, according to market research firm IHS Markit on Oct. 9. LCD TV panel prices had continued to fall until last month since the third quarter of 2017.
LG Display was hit hard by the drop in LCD prices, but the Chinese firms which have driven South Korean competitors out of the market with low-priced products, are also facing a tough situation now.
BOE, the largest LCD panel producer in China, posted US$68 million (81.59 billion won) in operating profit in the second quarter but US$60 million (71.99 billion won) of it was subsidies from the Chinese government. Considering the fact that BOE's sales came to US$4.19 billion (5.03 trillion won) in the second quarter, the firm’s actual operating profit to sales ratio, excluding subsidies, is only 0.2 percent. IHS Markit said, “A considerable portion of the Chinese government’s subsidies is regarded as a non-operating income. If subsidies are all excluded, Chinese companies may actually run into red figures.”
The situation is very much the same with Caihong Group, the parent company of CHOT. The group recorded an operating profit of US$13 million (15.61 billion won) in the second quarter thanks to the government’s subsidies worth US$69 million (82.86 billion won). Excluding the subsidies, it showed a loss. GVO had an operating profit of US$105 million (126.11 billion won) in the second quarter but more than US$104 million (124.90 billion won) of them came from the government. It cannot even stay in business without the government’s subsidies. Tianma has been receiving the smallest amount of the government’s subsidies among Chinese display panel producers but 32.7 percent, or US$19 million (22.81 billion won), of its operating profit of US$58 million (69.65 billion won) in the second quarter came from the government.