Handwriting on the Wall
Last December we noted that a small Chinese firm Jiangxi Infinitech Optoelectronics (pvt) was looking to enter the display display space and had plans to build an 80,000 sheet/month Gen 6 LCD/OLED fab in Jiangxi province with a budget of $3.52b US. The company let a number of purchase orders to South Korean equipment suppliers as construction began, with an initial completion date of 1Q 2019. Unfortunately production progressed slowly, and Infintech requested that a number of its suppliers push out the contractual deadlines for equipment it had ordered. Given that deadlines are not always met, Korean equipment suppliers Top Engineering (065130.KS), YEST (122640.KS), DMS (068790.KS), and Vessel (177350.KS) all agreed to the initial pushout, but Infintech kept asking for further extensions.
As a number of the companies accumulated materials necessary for the production of the items under contract and generated expenses against delivery, late last year questions began to be raised when word that construction of the factory had been halted and the CEO and top executives had departed from the company. While we expect the equipment suppliers were a bit suspect, the local Chinese government still considered the project ‘active’ and was still on the books as an operating entity.
The Korean Display Industry Association filed a complaint in July with the Chinese ambassador on behalf of the suppliers but found that the construction company that had been building the fab had filed a lawsuit against Infintech, which is what halted construction. Jump to today, and one of the suppliers, Top Engineering has taken the bold step to cancel its contract with Infintech, amounting to ~$11m and said it will collaborate with other Korean firms that have signed similar contracts, which together total about $90m. Unfortunately the Korean Display Industry Association, after the formal complaint, contacting the Chinese Display Industry Association, the Jiangsu government, and a Chinese law firm, has been unable to track down Infintech, which seems to have evaporated into the air in China. The question is, why everyone waited so long to cancel the contracts, even we saw the handwriting on the wall months ago? Were they expecting Infintech to suddenly appear with a check or bag of money?.
As a number of the companies accumulated materials necessary for the production of the items under contract and generated expenses against delivery, late last year questions began to be raised when word that construction of the factory had been halted and the CEO and top executives had departed from the company. While we expect the equipment suppliers were a bit suspect, the local Chinese government still considered the project ‘active’ and was still on the books as an operating entity.
The Korean Display Industry Association filed a complaint in July with the Chinese ambassador on behalf of the suppliers but found that the construction company that had been building the fab had filed a lawsuit against Infintech, which is what halted construction. Jump to today, and one of the suppliers, Top Engineering has taken the bold step to cancel its contract with Infintech, amounting to ~$11m and said it will collaborate with other Korean firms that have signed similar contracts, which together total about $90m. Unfortunately the Korean Display Industry Association, after the formal complaint, contacting the Chinese Display Industry Association, the Jiangsu government, and a Chinese law firm, has been unable to track down Infintech, which seems to have evaporated into the air in China. The question is, why everyone waited so long to cancel the contracts, even we saw the handwriting on the wall months ago? Were they expecting Infintech to suddenly appear with a check or bag of money?.
Infintech Fab Rendering - Source: Infintech
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