(Yicai Global) Dec. 27 -- Chinese display maker BOE Technology Group plans to team up with a local government in Yunnan province to spend CNY3.4 billion (USD486 million) on a new production line for micro organic light-emitting diode displays to meet booming demand from augmented and virtual reality tech.

The pair will build the facility in Dianzhong New Area with BOE contributing CNY1.8 billion in cash, BOE said. State-owned Dianzhong Industrial Development Group will invest CNY194 billion (USD28 million) and the duo will gather the remaining 40 percent from external sources.

The plans did no favors for BOE's shares [SHE:000725], which were down 3.3 percent at CNY4.67 (67 US cents) as of 2.28 p.m.

BOE will build the facility over the course of three phases. The line will produce 0.99 inch and 1.31 inch micro OLED displays for up to 10,000 12 inch wafers a month, beginning production in 2021 and reaching capacity two years later. It will sit next to BOE's existing factory, which makes displays with eight-inch wafers.

Displays using 12 inch wafers are cheaper to make than those with eight-inch wafers and can power larger, brighter screens while using less power, the statement said, adding that this makes them ideal for up and coming AR and VR technologies.

Editor: James Boynton