A ceremony held in Beijing to launch BOE Technology's 8.5-generation panel factory. (Photo/Xinhua)
In order to shed its reliance on imported flat panel displays, China has invested heavily in what is already a quagmire of sinking domestic firms, the biggest among them BOE Technology, reports the Guangzhou-based Southern Metropolis Daily.
Despite huge deficits in most of the past years since its inception 11 years ago, BOE — China's leading flat panel manufacturer — has so far carried out five cash capital increments, raising over 27 billion yuan (US$4.3 billion), the highest among listed Chinese firms across industries with the exception of certain state banks. Without seeing any profits from the investment, BOE recently announced another 60 billion yuan (US$9.6 billion) investment project, a major portion of which will be contributed by some province-level governments, including Beijing, Hefei and Chongqing.
Ye Tan, a respected economic and financial commentator, remarks that BOE has set a negative example by raising funds when it has not made any money. The company's CEO Chen Yuanshun, however, remains optimistic that the agony of the investment stage is over and the company will be able to turn its fortunes around in time.
In 2012, thanks to the upturn of the flat panel industry and the opening of its four production lines, two of which are 8.5-generation, BOE is expected to finally become profitable. Industry insiders and investors, however, have a string of questions about the 60 billion yuan project, including the sources of the new fund, the level of technology and the possibility of overcapacity.
According to the company's report for the third quarter of 2012, BOE boasts 68.1 billion yuan (US$10.9 billion) in total assets, 41 billion yuan (US$6.6 billion) in liquid assets and cash funds, and 7 billion yuan (US$1.1 billion) in accounts receivable. Its total debts top 34 billion yuan (US$5.4 billion). Investors worry that the company may have to conduct another cash capital increment in order to fund the 60 billion yuan investment.
Chen Yuanshun said that such an increment is unnecessary as the company has secured funding commitments from several municipal governments, including 10 billion yuan (US$1.6 billion) from the Hefei government and 10.8 billion yuan (US$1.7 billion) from the Chongqing government.
BOE will also fund the project with its own money, since the company's cash flow has improved following the upturn of its operations in 2011. BOE's cash flow topped 3 billion yuan (US$480 million) in 2012, which will increase to 6-7 billion yuan (US$960 million-$1.1 billion) in 2013, said Chen. He added that some industry funds and investors, especially strategic investors, are interested in the project, thanks to the improvement of the investment climate for the industry.
Chen said the investment project is meant to push the company into the ranks of the global top five. "The investment of BOE is based on technological progress and market demand, especially from the Chinese market," he said.