Samsung spokesman James Chung, and Son Young Jun at LG, said on Thursday the companies received notices from China about the decision last week. Japans Sharp Corp, which had also sought permission to build a display factory in the country, hasnt received any such notification from the Chinese government, spokeswoman Miyuki Nakayama said.
The approval paves the way for the two South Korean companies to build multi-billion dollar factories in Suzhou and Guangzhou to meet Chinese demand for flat panel displays used in televisions and computers. Setting up the plants will enable the companies to be closer to the assemblers and reduce costs, Seoul-based analyst Choi Do Yeon said.
"China is a market where a very large number of households havent switched to LCD televisions yet," said Choi, an analyst at LIG Investment & Securities Co. "Even though its the fastest growing market in the world, it still has a lot of growth potential. The new factories can be beneficial in terms of securing distribution channels."
Samsung, the worlds largest LCD maker, expects to start operating the factory in about a year and a half, Chung said.
The companys shares rose 4.8 percent, the biggest gain in a year, to close at 859,000 won ($748.97) and LG Display gained 1.3 percent to 40,500 won in Seoul on Thursday, outperforming the 1.1 percent gain by South Koreas benchmark KOSPI stock index.
China became the largest LCD-TV market in the third quarter, surpassing the United States, according to Soh Hyun Cheol, an analyst at Shinhan Investment Corp in Seoul. About 39 million units will probably be sold in the country this year, and sales are estimated to increase to 46 million next year, he said.
Sharp, Japans largest LCD maker, said in August 2009 that it had reached a preliminary agreement with China Electronics Corp to form a venture to make LCDs based on eighth-generation (8G) technology. The company also said it will sell LCD manufacturing equipment to China.
Samsungs proposed 2.6 trillion won plant in Suzhou will be based on the so-called 7.5-generation LCD technology, while LG Displays $4 billion factory will use 8G technology. 8G plants are designed to make displays measuring more than 40 inches diagonally.
The South Korean government gave approval for the companies to go ahead with the projects last December, while asking them to find ways to prevent technology leaks.
Chinas government accepted the applications of LG and Samsung in February, according to Chung and Son.
