_Chinese Government Subsidies – The BOE kind
We have repeatedly mentioned the fact that Chinese display producers are in an advantageous position in regard to capital spending, as the Chinese government, at a number of levels, subsidizes the industry. BOE (200725.CH), the largest of the Chinese display producers is the recipient of a substantial number of these subsidies, and while we note the dollar value, the subsidies are also reflected in commitments by provincial and local governments to provide the infrastructure necessary to build such large fabs. This usually includes bringing power to a particular location, sometimes in regions where it must be drawn from grids considerable distances from the site, providing water, which can be even more problematic, and even logistical subsidies, like the building of roads and rail lines to connect the fab to main transportation routes, all of which significant costs to non-Chinese producers.
All of that said, between 2011 and 2015, BOE received 17.769b yuan, or $2.63b US, and while much of this is considered ‘research grants’ for R&D purposes, it goes a long way toward reducing the long-term cost of display development in China, whose long-term plan of eventually becoming self-sufficient in the display space has some overtones of market domination. It would be ridiculous to assume that Chinese panel producers will focus entirely on in-country production, as they are already selling outside of the mainland, so the Central government’s argument that these subsidies are for the development of local manufacturing is moot, but not surprising. Few companies would refuse such ‘gifts’ regardless of their nationality, so we can’t fault BOE for taking them, although the Chinese government might acknowledge that they do not make these subsidies purely for locally altruistic purposes (and we also know that will never happen!).
All of that said, between 2011 and 2015, BOE received 17.769b yuan, or $2.63b US, and while much of this is considered ‘research grants’ for R&D purposes, it goes a long way toward reducing the long-term cost of display development in China, whose long-term plan of eventually becoming self-sufficient in the display space has some overtones of market domination. It would be ridiculous to assume that Chinese panel producers will focus entirely on in-country production, as they are already selling outside of the mainland, so the Central government’s argument that these subsidies are for the development of local manufacturing is moot, but not surprising. Few companies would refuse such ‘gifts’ regardless of their nationality, so we can’t fault BOE for taking them, although the Chinese government might acknowledge that they do not make these subsidies purely for locally altruistic purposes (and we also know that will never happen!).
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