The Chinese mainland will fine six overseas suppliers of LCD displays - including South Korea-based Samsung Electronics Co and LG Electronics Inc as well as four Taiwan-based firms - a combined 353 million yuan ($56.64 million) for using their dominant position to manipulate prices, the National Development and Reform Commission (NDRC) announced Friday.
As many have already pointed out, the NDRC's move marks the first time mainland authorities have fined overseas enterprises for price fixing in the mainland. Yet in this particular instance, given the weak LCD manufacturing industry in the mainland, the region's television, phone and computer manufacturers may be little inclined to support the commission's recent anti-monopolistic effort.
The local industry lacks the scale and technological know-how present in many advanced economies in Asia and the West. Thus, when local tech brands need displays, they have little choice but to import them.
Of course, international LCD makers are well aware of supply and demand forces in the mainland and priced their screens accordingly. In fact, industry data show that over the past decade, imported screens accounted for between 70 percent and 80 percent of production costs for local television manufacturers. Hefty import prices have worn away at the competitiveness of emerging local tech brands, eventually leading the NDRC to take action.
For local firms though, expensive displays were better than no displays at all. But now that the NDRC has made it harder and more expensive for the six companies mentioned above to do business in the mainland, these leading LCD suppliers could take the commission's fine as a sign that it's time to scale back screen deliveries in the country. For mainland manufacturers - who rely on foreign tech companies for some 80 percent of their LCD supplies - a shortage of these critical components could be disastrous.
What's worse, many mainland producers do not have formal supply agreements with their overseas LCD suppliers, Hao Yabin, vice chairman of the China Video Industry Association, said recently, a fact which could make it all the more easy for screen makers to stage a tactical retreat.
Given conditions in the market, no wonder few domestic tech brands have come forward to express support for the NDRC's attack against the foreign screen monopoly.
In addition to its efforts to break up monopolies, mainland regulators should try to protect domestic enterprises by promoting legally-binding supply agreements and, more importantly, strengthening the domestic LCD screen supply chain.
<i>The author is an economic commentator. firstname.lastname@example.org</i>