Changhong Electric Co Ltd, the fourth-largest Chinese TV maker, acquired Seoul-based Orion PDP, a flat-panel display maker, to move into the upper level of the television production value chain, according to the National Development and Reform Commission.

The commission said on its website that Century Shuanghong Display Devices Co Ltd, an 80-20 joint venture between Changhong and the biggest Chinese colour TV tube maker Irico Group, had acquired 75 per cent of Sterope Investments BV in the Netherlands for US$99.9 million. The Dutch firm holds the South Korean firm Orion PDP.

The acquisition is the second of a South Korean electronics firm by a Chinese company in the past four years. The deal shows an increasing interest by Chinese firms in buying electronics businesses for their technology.

Meanwhile, smaller South Korean electronics firms, facing mounting pressure from dominant players such as Samsung Electronics and LG Electronics, are choosing to be bought out rather than competing in the market.

In 2003, Beijing-based BOE Technology Group acquired the loss-making FTF-LCD unit of South Korean counterpart Hynix for US$380 million.

"Orion is just a second-tier player in the plasma display panel (PDP) market, and with the consolidation trend going on, it has to choose to team up with other firms," said Yang Lei, a flat-panel display analyst with CCID Consulting Co Ltd, a domestic electronics industry consultancy.

Yang said the deal allows Changhong to extend its reach into the higher end television manufacturing industry.

Changhong's shares on the Shanghai Stock Exchange fell by 2.2 per cent to 4.01 yuan (51 US cents) yesterday, while that of Irico rose by 1.06 per cent to 2.85 yuan (36 US cents).

Sichuan-based Changhong is one of the few Chinese TV makers with a strong presence in the PDP market, while other firms are concentrating on LCD TV sets.

PDP TV sets usually have bigger screen sizes. But with an abundant panel supply and quick technological progress, LCD TV sets are the trend.

According to the Ministry of Information Industry , Chinese TV makers produced 5.9 million LCD TV sets in the first nine months of this year, 136 per cent higher than the same period in 2005. Only 482,000 units of PDP TV sets were made, 13 per cent lower year-on-year.

The change in the market affected Changhong's performance. In the first half of this year, while its other two business lines, white appliances and IT products, both rose year-on-year, revenue for its TV-dominated dark appliance business, accounting for more than half of the company's total, fell by almost 10 per cent over the same period last year to 426 million yuan (US$54 million) in revenue.

Yang with CCID Consulting said the acquisition will allow Changhong to have a stable panel supply and benefit from a reduction of costs.

In October, Changhong and Irico sharply boosted their investment into Century Shuanghong from 2 million yuan (US$320,000) to 1.8 billion yuan (US$230 million), and started a plasma panel production base.

Source: China Daily