China Star Acquires Samsung Suzhou

Published August 31, 2020

TCL Technology Group, the corporate parent of China Star Optoelectronics Technology (CSOT), announced this week an agreement to acquire Samsung Display’s assets in Suzhou, China, including a Gen 8.5 fab and a co-located LCD module plant. Under the deal, TCL will pay Samsung more than $1 billion, but the majority of the money is returned to TCL as an investment, and Samsung Display will become a minority shareholder in a TCL subsidiary.

TCL will acquire Samsung Display’s 60% equity in Suzhou Samsung Electronics LCD Technology Co., Ltd. and 100% equity of Suzhou Samsung Display Co., Ltd. Prior to the transaction, TCL had a 10% share in the Suzhou fab, with the transaction they will now own 70%, with the remaining 30% owned by Suzhou Industrial Park State-owned Assets Holding Development Co., Ltd.

The transfer price was listed as US$1.080 billion (~CNY 7.622 billion) for both businesses. At the same time, Samsung Display will pay US$739 million (~CNY 5.213 billion) to purchase a stake in TCL subsidiary TCL Huaxing via a capital increase. TCL Huaxing is the subsidiary holding CSOT’s large gen display fabs, including its Gen 8.5 and Gen 10.5 fabs (TCL calls these Gen 11, but DSCC recognizes them as Gen 10.5) in Shenzhen.

Within the $1.08 billion total, the payment for the Gen 8.5 fab is $739 million, which corresponds to the Samsung capital increase in TCL Huaxing. The other $341 million for the module plant represents a cash transfer from TCL to Samsung.

After the capital increase, Samsung Display will have a 12.33% stake in TCL Huaxing, and the right to place an observer on the board of TCL Huaxing. The majority ownership (80.28%) of TCL Huaxing will remain with TCL Technology, with small shares held by China Development Bank Development Fund Co. and Guangdong Yuecai Trust Co., Ltd.

As part of the justifications for the acquisition, TCL stated that it expects that with industry consolidation “the cyclical volatility of the display industry will decrease, and the advantages of leading companies will increase.” TCL noted that, “After this acquisition, TCL Huaxing will have 3 full-production 8.5-generation lines in the large-size field, with monthly output a total of 440K substrates; 1 full-production 11-generation line, with a monthly production capacity of 90K, and another 11-generation line under construction.”

Another important justification from TCL is to “Introduce Samsung Display as a shareholder of TCL Huaxing to deepen the strategic cooperation between the two parties.” The company noted that “Samsung has always been an important customer of TCL Huaxing’s large, medium and small size products. After the transaction is completed, the two sides will carry out closer strategic cooperation.”

Given that Samsung’s Visual Display division continues to focus on LCD technology (see the article in this issue on QD OLED), and Samsung Display is exiting the LCD business, CSOT will become the main supplier of LCD panels to both the #1 and the #2 global TV brands in terms of unit sales.

The release by TCL noted that the transaction still needs to be approved by regulatory agencies in both China and Korea. These are not expected to be a barrier.

As a result of this acquisition and the expected acquisition by China Star of multiple CEC Panda fabs, China Star will become a much stronger competitor to BOE, especially in large-area LCD. The 2 companies will each control at least 20% of the LCD market as shown in the figure from 2021 reaching a 42%-44% total LCD capacity share with CSOT significantly narrowing the gap. In just large-area LCD defined as G7+, the new China Star will narrow the gap to ust 1-2% points with each accounting for at least a 25% share from 2022 creating a duopoly.

China Star and BOE LCD and G7+ LCD Panel Capacity Share

Source: DSCC’s Quarterly Display Capex and Equipment Market Share Report
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Written by

Ross Young