Samsung is selling its interest in a liquid crystal display (LCD) factory it co-founded in 2011 to TCL Technology Group, Corp. for $1.08 billion, reports Caixin. The two firms launched the Suzhou, China-based production facility in tandem with the Suzhou Industrial Park. Once the sale is complete, TCL Technology will own 70 percent of the manufacturing site.
The South Korean electronics giant announced it would exit the LCD market in April.
How Samsung Benefits from Selling its LCD Plant
The main benefit Samsung will derive from divesting itself of its LCD factory is financial. Since the brand is actively developing new quantum light-emitting diode (QLED) technology, the older plant does not fit into its roadmap.
The electronic device company also furthers its strategic interests by selling its stake in the Suzhou factory.
Last October, the firm closed its smartphone production facility operated in Huizhou. Two months ago, the conglomerate launched an initiative to build up the South Korea microelectronics industry to bolstering its domestic supply chain.
Samsung made its recent moves to cut production costs and avoid U.S.-China trade war-related logistics headwinds.
How TCL Benefits from Taking a Controlling Interest in the Suzhou Factory
As opposed to Samsung, TCL Technology is still an active player in the LCD business. For the company, the buyout represents an opportunity to expand its production capacity. Since the firm previously only held a 10 percent stake in the plant, it is gaining a lot of factory space.
In addition, Samsung is one of the world’s leading developers and manufacturers of electronic components. Even though the Suzhou plant utilizes 8.5-generation LCD technology, it is still a facility worth owning. If its output is more efficient than TCL Technology’s other plants, it will gain an advantage on its rivals.
Lastly, TCL Technology’s $1.08 billion purchase makes sense because the global electronics industry is not driven entirely by innovation.
For instance, Huawei established a significant presence in the worldwide smartphone market because its products are affordable. For many consumers across the globe, price is a bigger motivating factor than technological sophistication.
As such, TCL Technology could significantly improve its market position by solidifying its status as a quality mid and lower-tier electronics provider.