Shanshan Shares Acquired LG Chemical Polarizer Business Panel Upstream Industry Localization Speed Up

"Lack of core and less screen" was once the dilemma of China's electronic industry. Now, with the strong rise of LCD panel industry, China is breaking the road of "less screen" and stepping into a big display country.

However, in the rising trend of domestic display panel, there is still a certain "neck" dilemma in the upper and middle reaches. However, as an important component material of display panel, the localization of polarizer is speeding up.

In June 2020, Shanshan (600884. SH) started to acquire LCD polarizer business and related assets of LG Chemical in mainland China, Taiwan and South Korea, and established Shanjin optoelectronics, a polarizer enterprise. The total price of the acquisition is US $1.1 billion, and 70% of the purchase price is paid in advance, i.e., US $770 million. On February 1, 2021, the acquisition completed the asset delivery.

Recently, Zheng Yonggang, chairman of Shanshan shares and Shanjin optoelectronics, made his first appearance since the acquisition and accepted media interviews including the 21st century economic report. He pointed out that after the acquisition of LG Chemical LCD polarizer business, Shanjin optoelectronics has now become the leader in the global LCD polarizer field, with the largest scale and leading technology. In the future, Shanjin optoelectronics hopes to form synergy with upstream and downstream industries, so that the panel industry as a whole will get rid of the "neck jam" situation as soon as possible.

Break the monopoly of Japan and South Korea

According to the data, in 2020, China's total LCD panel shipment accounted for about 60% of the global total, and has occupied a strong position in the global market. From the initial introduction to the later independent production, Chinese enterprises now control most of the world's production capacity and dominate the industry competition.

However, despite the strong sales of domestic LCD panel, the upstream industry of display panel is still "short board".

Among them, polarizer, as one of the three key raw materials of LCD, has a gap. It is understood that the cost of polarizer in LCD panel accounts for about 15%, which is also one of the most difficult areas for domestic LCD panel technology in China. In recent years, the world's polarizer manufacturers are mainly Japanese and Korean enterprises, and the top 3 production capacity is respectively nisso, LG Chemical and Sumitomo.

However, this situation will be broken after Shanshan shares acquired LCD polarizer business of LG Chemical by way of capital increase, and the newly established Shanjin optoelectronics Co., Ltd. has become the world's largest polarizer supplier. Zheng Yonggang said that after the acquisition, the market share of Chinese enterprises will increase from less than 10% to more than 45%, and the stability and safety of the core material supply will be fully guaranteed.

According to omdia data, China's polarizer capacity gap will reach 24% in the next five years. In order to realize the double guarantee of production capacity and performance, Shanjin optoelectronics will start from production line, R & D, upstream and downstream cooperation, etc.

Zhu Zhiyong, general manager of Shanjin optoelectronics, said that at present, two production lines of Shanjin Optoelectronics in Zhangjiagang have been started, and the two 2.6m ultra wide lines in Guangzhou are expected to be mass produced by the end of the year to match the continuous rising demand of the current industry. In the future, Shanjin optoelectronics will continue to expand its production capacity to meet the needs of the intelligent era with 10 global leading production lines and products.

In addition, Shanjin optoelectronics will continue to strengthen technology research and development and cooperation with upstream material suppliers. "We will accelerate the construction of independent R & D center and upstream and downstream collaborative innovation platform, continue to invest, expand the scale, strengthen the response ability of large-scale TV and it products, continuously improve the localization rate of polarizer and upstream materials, and comprehensively consolidate the leading position of the industry." Zhu Zhiyong said.

Rebuild a "new Cunninghamia lanceolata"

Although the current Shanjin optoelectronics is full of vitality, but for Shanshan shares, after all, polarizer is a new field.

Zheng Yonggang also admitted in the exchange that he was not interested in the "olive branch" thrown by LG Chemical at the beginning. "When someone told me about the acquisition, I said I didn't have money, so I didn't dare to take it."

Zheng Yonggang also has a question: if it is a good thing, why should the other party withdraw? You want to sell it to me? After all, the main business of Shanshan was clothing before, but after diversified exploration, involving new energy, finance and other fields, the experience of semiconductor related to polarizer is blank.

However, after consulting many industry insiders, Zheng Yonggang learned that, on the one hand, the sale of LG Chemical is the result of its comprehensive strategic adjustment. In the future, LG Chemical will focus on the lithium battery field, so it plans to withdraw from other fields. On the other hand, polarizer is one of China's "neck" industries. Considering the positive impact of the acquisition on the formation of China's display industry chain Zheng Yonggang was shaken.

The reason why LG Chemical is willing to reach an acquisition with Shanshan shares is due to the cooperative relationship between the two sides in the field of lithium battery for more than ten years. "They don't have the same idea. They want not only a good price, but also a future for the business." Zheng Yonggang said.

Considering many factors, Zheng Yonggang finally decided to enter the polarizer industry. However, in the acquisition process of Chinese and foreign enterprises, it is inevitable to encounter problems such as the instability of the original team and the long running in period. Therefore, the final negotiation result between Shanshan and LG Chemical is to purchase 70% of the equity first, and then realize the wholly-owned acquisition three years later, "on the condition that none of the senior executives can leave." Zheng Yonggang told the 21st century economic reporter.

And for the cross-border Shanshan shares, perhaps also really wade into the "tuyere". Zhu Zhiyong told the 21st century economic report that before 2018, the panel price will fluctuate periodically, which will affect the price of upstream polarizers. However, in the future, the periodicity will become weaker and even disappear.

"In fact, this is the process of our domestic panel enterprises catching up. From catching up to now, China's panel enterprises have begun to have absolute discourse power and pricing power in the industry," Zhu Zhiyong said frankly. "With the withdrawal of Japanese and South Korean display panel enterprises in the future, the recent global demand for large-scale display panels, and the explosive growth of the industry caused by the epidemic situation, the future will be improved The panel industry will maintain a healthy development state. "