LG Chem will make additional investment in expansion of product lines this year following last year while Kolong looks set to enter the market

Domestic chemical players will embark on efforts to catch up with the dominant Japanese firm in the market for indium tin oxide (ITO) film, a core component of the touch panel. A case in point is LG Chem which poured money into expanding its plant. Nitto Denko grabs some 90 percent of global market. Korea currently depends entirely on imports of ITO film, which is used to make smartphones and tablet PCs.

According to those familiar with the industry on February 25, LG Chem recently decided to make additional investment to expand its ITO film line this year, apart from the 50 billion won production facility it had built last year. The first line is to be used to make prototypes, and the new line will be used for mass production.

One company official said, “We have decided to make investment into building an ITO facility this year following last year.”

The timeline and investment amount are yet to be known. LG is preparing to start full-scale mass production of ITO film by, e.g., testing prototypes in the production facility completed in Q2 and Q4.

ITO film is a PET film thinly coated with indium and tin so that the film conducts electricity. It is a core component of the touch panel. Touch panel is mostly an electrostatic capacity type that recognizes location based on static electricity from the fingers, not on the pressure put on. It is a material used to create X- and Y- axes that sense finger contact points. As much as it is important, the price is high, representing 24% of the total costs of touch panels, making it the second most expensive component after tempered glass.

In particular, amid an ever-growing market for smartphones and tablet PCs, demand for ITO is also rising. The industry expects the market to grow from around 12 million ㎡ a year to over 16 million ㎡ two years from now.

Buoyed by such market conditions, Nitto Denko continues to post double-digit growth in operating profits even amid global economic stagnation. According to the earnings report released late last month, the company recorded JYP 606.5 billion in sales from April 1 to December 31 of last year, an increase of 9.4% compared with the same period a year earlier. Operating profit rose 13.6% to JYP 55.1 billion. Its rate of operating profits approached 10 percent with net income of around JYP 36 billion. One industry official said, “It is hard to estimate exactly the percentage the ITO business makes up of Nitto Denko’s overall business,” adding, “ITO business is the ultimate cash cow for the company.”

The reason that LG Chem launched efforts to domestically produce ITO films is its high rate of return and increase in demand. Tricky technological barriers, however, remain a challenge. In order to enable a sensitive response by the touch panel, materials such as indium should be coated evenly on the film. Yet, such process called chemical vapor deposition (CVD) is technically difficult to implement. Not a few companies both at home and abroad failed to break the monopoly held by the Japanese firm even after developing ITO films because they failed to make products whose quality is high enough to be adopted in high-end smartphones. The atmosphere is quite different in LG Chem. Observers predict that once it launches mass-production, it could pose a serious threat to the Japanese firm.

Not just LG Chem, but Kolon Industries is also setting its sight on the market. The company has been working on developing an ITO film for several years using the existing film-producing technology, and is currently testing products. Apart from that, several domestic chemical companies are reportedly planning to manufacture prototypes, etc, at a product testing phase.

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