China’s RMB26.5B household electrical appliances subsidy and LCD panel production

May 17, 2012 — Barclays Capital’s Asia IT analyst Jones Ku shares details of China’s State Council’s RMB26.5 billion (about US$4.2 billion) subsidy program for household electrical appliances.  The program will be in effect for one year and cover flat-panel display (FPD) television sets, refrigerators, energy-efficient vehicles, air conditioners, and more. The program sets aside RMB2.2 billion to promote consumption of light-emitting diodes (LEDs) and “other energy-saving light bulbs.”

There is currently no announcement on when the program will start, though Barclays expects it to be implemented in late June or early July. Ku says it is likely to be similar to the subsidies for energy-saving products that were trialed in Beijing from September 2011-February 2012 (10% of the selling price, with a cap of RMB400), but with the focus expanded to include more cities.

The subsidy could stimulate LCD TV demand particularly in China’s urban areas, and could also eliminate near-term risk factors for LCD panel demand. Expansion in the Chinese TV market is centered on rural areas in which Chinese local firms are dominant. As China accounts for 20%+ of worldwide demand, any boost in regional demand should help the global market. Ku notes that Corning supplies BOE, the largest domestic panel maker in China.

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