Commentary: Investing into China technology park needs further ...

Commentary: Investing into China technology park needs further consideration

Julian Ho, Taipei; Jackie Chang, DIGITIMES?[Monday 28 May 2012]

TPV Technology, the world's largest LCD display producer, began construction of a technology park in Pingtan Island in China's Fujian Province in December 2011. Pingtan Island was chosen because of its short distance across the sea from Taiwan. Despite strong support from TPV, some small- and medium-size firms in Taiwan believe the technology park is more suitable for large-size firms. In addition, low transparency of business policies in China has been causing Taiwan-based firms to think twice before investing.

LCD display moving west-ward

In fact, from the perspective of the global LCD display end market industry, China's domestic market is important for Korea-, Japan-, Taiwan- and China-based firms. The consumption power of developed market such as the US and Europe has been waning due to economic woes, so the LCD industry is looking to the potential of China's market.

Japan-based LCD display firms saw market share fall in 2011, while China-based competitors rose. Although TCL and Hisense are the only two China-based TV brands that shipped over 10 million units in 2011, others also have been showing strong ambitions to surpass industry leading firms such as Sharp.

TPV's largest shareholder is China-based Great Wall Computer Shenzhen, which is a part of China Electronics Corporation. TPV has been developing China's market for quite some time and in 2011, the firm's market share in LCD display OEM business reached 35%. A strong relationship built by Jason Hsuan, chairman and CEO of TPV, with different industry leaders helped the firm to reach success in the market.

TPV noted that there have been many firms in other countries such as Singapore and South Korea that want to develop the technology park in Pingtan Island. Taiwan-based firms should capture the opportunity to join this technology park.

Not suitable for small- and medium-size firms

Hsuan pointed out that Pingtan's development needs less than 20 years to complete.

According to government data in China, the government invested over CNY30 billion (US$4.73 billion). In addition to TPV, Xielli Group also invested in CNY12 billion for the IC business in the technology park. The initial investments from Xielli were CNY7.3 billion and the construction of the packaging facility is estimated to be completed by end of 2012. The 6-inch wafer plant has been scheduled to begin production in first-half 2014.

Furthermore, Taiwan-based Chunghwa Telecom has been discussing cooperation with China Telecom's Fujian Office to build a "smart Pingtan" through joint effort on planning, investing, constructing, managing, and profit-sharing.

Despite optimistim on the development of Pingtan by industry leaders such as Jason Hsuan, Taiwan's industry players have different views. Leaders in small- and medium-size enterprises believe the development trend of Pingtan's technology park is more suitable for large-size corporations.

According to Taiwan's Mainland Affairs Council, China has been eager to recruit Taiwan-based firms to set up plants in Pingtan's technology park. However, Taiwan's government has not been participating in the project. Ministry of Economic Affairs in Taiwan also indicated some risks for Taiwan-based firms to invest in the technology park due to lack of complete infrastructure.

Lack of transparency

In addition, the lack of transparency in China politics and the complex relationships between politics and business have been concerns for Taiwan-based firms. Despite short-term benefits, Taiwan-based firms may in fact be exporting technologies to China, which would cripple Taiwan's competitiveness.

TPV noted that the promotion of Pingtan's technology park is to provide opportunities for the following generation.

Nevertheless, the historical, political and industrial problems between China and Taiwan cannot be overlooked or simplified through the perspective of business.

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