SEOUL (Dow Jones)--Liquid-crystal-display maker LG Display Co. (LPL) said Tuesday it has signed a non-binding memorandum of understanding with the Guangzhou government in China to set up an advanced panel manufacturing plant there that could cost more than US$3 billion.
This would be LG Display's first LCD manufacturing facility in China and the company joins a slew of other panel makers to expand production and cooperation with the mainland to tap growing demand in the region.
Earlier this year, China unveiled a stimulus package aimed at spurring rural consumers to purchase more electronic goods. Thanks partly to that move, demand for LCD televisions and computers has been robust this year from the mainland despite tepid demand from the U.S. and Europe.
LG Display said in a statement the plant would use advanced 8th-generation LCD technology, meaning that it would be capable of churning out 50-inch size LCD TVs.
This would be LG Display's third 8th-generation plant. The company already operates facilities in Paju, South Korea.
"It normally costs about KRW3 trillion for building an 8th-generation panel plant, but since the infrastructure in China remains weak, the (investment) cost needs to be reevaluated," said a company spokesman.
The agreement is subject to the approval of South Korea's government as well as LG Display's board members.
Last month, LG Display said it will invest KRW3.27 trillion ($2.6 billion) to expand its 8th-generation LCD production line in Paju to meet growing market demand for flat-screen televisions.
LG Display declined to say how it will fund the investment in China and when the facility would come online.
In the second quarter, the company's net profit fell 60% from a year earlier to KRW302 billion as the global economic slump hurt demand for consumer electronics.
Some analysts expressed concerns about a potential oversupply with a new plant ramping up.
"The business outlook for next year seems unfavorable compared to the latter half of this year, as more supply is expected in the wake of increasing new production lines," said Lee Seung-woo, an analyst at Shinyoung Securities.
The LG Display spokesman said it will take at least two to three years to build the plant.
The flat-panel maker already has two LCD module plants in China that assemble flat panels used in LCD TVs, monitors and notebook computers.
