Next One to Go?
China is big on promoting its success in the LCD display space, and rightly so given its regional revenue dominance of nearly 50% of large panel LCD sales, but while BOE (200725.CH) and Chinastar (pvt) stand out in terms of growth, not all Chinese LCD panel producers have been quite as successful, even with the help of the Chinese state or local governments. N One such casualty is Nanjing Panda (600775.CH), a panel supplier that began its first production line in September of 2011, and at its peak had one Gen 6 fab and two Gen 8.5 fabs in Nanjing and Chengdu. Unfortunately Panda was not able to sustain profitability and was forced to sell both Gen 8 fabs to BOPE for $1.78b, leaving it with one Gen 6 fab whose lines were over 8 years old on average.
Panda’s largest shareholder is the Chinese state, which through a number of state-run entities owns almost all of the shares that are not in the hands of the public, although there are no greater than 5% individual shareholders in the public group, so the impact of any continuing financial difficulties would likely be borne primarily by the government, but it seems that even with quarterly state grants, things have not been living up to plan for the company as losses continue. According to local press, it seems that Le Eco (pvt) a Chinese CE brand that has had its own financial problems, camped outside of Panda’s fab carrying signage that read, “China Electronics Panda Home Appliance Repay My Hard-earned Money!”, and other similar statements.
It seems that Le Eco had been supplied LCD TV panels by Panda that it used in its branded TV sets. Under a contractual agreement, Panda was required to reimburse Le Eco if the panel failure rate exceeded 1.8%, roughly an industry standard, however Le Eco found that the failure rate was as high as 20% for three of the models supplied by Panda and tried to negotiate with Panda concerning the cost of replacement or repair over the last 18 months. Unfortunately, Panda has not reimbursed the company for the cost of replacement displays that Le Eco was forced to purchase, even though both parties agreed that the Panda displays were the cause of the TV defects.
As Panda is theoretically part of China’s state-run electronics conglomerate China Electronics Corporation, Le Eco thought it would have no problem collecting what was due, yet Panda seems unable or unwilling to make amends for the inferior displays. As the publicity over the ‘protest’ gets into the media, we expect either Panda will make amends or the company’s reputation will suffer so much that their financial difficulties will worsen, which would eventually cause the company’s demise. Such things usually take some time to play out, so we would not expect much change in the near-term, but given the weakness seen in the CE space, weaker players in the LCD space, despite government subsidies, will eventually be culled from the herd.
Panda’s largest shareholder is the Chinese state, which through a number of state-run entities owns almost all of the shares that are not in the hands of the public, although there are no greater than 5% individual shareholders in the public group, so the impact of any continuing financial difficulties would likely be borne primarily by the government, but it seems that even with quarterly state grants, things have not been living up to plan for the company as losses continue. According to local press, it seems that Le Eco (pvt) a Chinese CE brand that has had its own financial problems, camped outside of Panda’s fab carrying signage that read, “China Electronics Panda Home Appliance Repay My Hard-earned Money!”, and other similar statements.
It seems that Le Eco had been supplied LCD TV panels by Panda that it used in its branded TV sets. Under a contractual agreement, Panda was required to reimburse Le Eco if the panel failure rate exceeded 1.8%, roughly an industry standard, however Le Eco found that the failure rate was as high as 20% for three of the models supplied by Panda and tried to negotiate with Panda concerning the cost of replacement or repair over the last 18 months. Unfortunately, Panda has not reimbursed the company for the cost of replacement displays that Le Eco was forced to purchase, even though both parties agreed that the Panda displays were the cause of the TV defects.
As Panda is theoretically part of China’s state-run electronics conglomerate China Electronics Corporation, Le Eco thought it would have no problem collecting what was due, yet Panda seems unable or unwilling to make amends for the inferior displays. As the publicity over the ‘protest’ gets into the media, we expect either Panda will make amends or the company’s reputation will suffer so much that their financial difficulties will worsen, which would eventually cause the company’s demise. Such things usually take some time to play out, so we would not expect much change in the near-term, but given the weakness seen in the CE space, weaker players in the LCD space, despite government subsidies, will eventually be culled from the herd.
Nanjing Panda Large Panel LCD Sales - Source: SCMR LLC, Displaysearch, IHS, OMDIA
LE Eco Protest at Panda - Source: OfWeek Network
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