The joint-venture company formed by LG and Philips will up production of large LCDs and hopefully push down prices

LG Philips on Friday opened the doors to a new plant that may help move larger LCD monitors into the mainstream consumer electronics market.

The plant, based in Kumi in South Korea, will allow LG Philips to produce more large LCD panels for computers and TVs, faster and more cost efficiently than previous generations of plants, according to Bruce Berkoff, LG Philips' executive vice president of marketing. LG Philips, based in Seoul in South Korea, is a joint-venture company formed by LG Electronics and Philips Electronics in July 1999.

The supply from the new plant should help quench demand for LCD panels, which is exceeding supply -- something unheard of when LG Philips committed to building the plant in April of 2000. At that time, supply was abundant, and prices were falling rapidly. Subsequently efforts by Dell, Apple and Gateway to promote flat-panel monitors, as well as a slowdown in production, led to rising demand and higher prices.

The plant will reach full production capacity in the second half of the year, achieving 60,000 sheets of glass per month. The glass sheets used in the new plant will be larger than those used in previous generations of plants, so the company will be able to produce more monitor panels out of one sheet. For example LG Philips will on average be able to make nine 18-inch panels out of one sheet of glass at the new plant versus the four 18-inch panels possible at an older plant, according to Berkoff. This lets the company produce more products for less money, making for lower consumer prices and potentially greater sales volumes.

LG Philips will focus on producing more 15- and 18-inch LCD monitors, 15-inch notebook PCs and larger LCD TVs.

Samsung is scheduled to go into volume production, no later than early next year, according to Rhoda Alexander of market research firm iSuppli/Stanford. "Both of these companies were ahead of the curve in that they committed to these facilities in 2000 based on their projections," Alexander said. "They did this at a time when supply actually outstripped demand, so they gambled and won because they are hitting that demand target just right."

Berkoff sees the market moving in two-and-a-half-year boom-and-bust cycles. Right now, the industry is eight months into the rising side of the cycle. Prices have been increasing slightly this year and, according to Berkoff, next year they should stabilize, followed by a slightly down period in 2004.

But Berkoff added that the new plant gives LG Philips an opportunity to help grow the market and make larger monitors the norm, which could insulate it somewhat from low-end price wars. "We want to take the opportunity to help shift the mainstream market to a larger average-sized LCD," Berkoff said.

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