(Yicai) Aug. 30 -- BOE Technology Group said the Chinese display panel giant will expand its plant in Vietnam to make televisions and other consumer electronics as a way to absorb more of China’s excess screen production and enjoy preferential export tariffs in the Southeast Asian country.

BOE intends to invest as much as CNY2 billion (USD274.4 million) to build the second phase of its factory in Vietnam’s Ba Ria-Vung Tau province, which is expected to take about 14 months to be completed, the Beijing-based firm said on Aug. 28.

Through the expansion, BOE will take advantage of preferential export tariffs to multiple countries and build a competitive local supply chain, improving its core competitive advantages based on the synergy and scale of its production capabilities, the firm noted, adding that Vietnam also has large labor resources.

The announcement comes as players in the upstream panel industry are striving to tackle overcapacity. BOE’s first-half earnings results showed on Aug. 28 that operating income from display devices fell 14 percent to CNY67.9 billion (USD9.3 billion) from a year ago, accounting for 84.7 percent of total revenue. Major rival TCL Technology Group also reported a drop in revenue from the business.

Display panel prices began to pick up in the second quarter, but that was not because of a recovery in demand, Li Yaqin, general manager at Sigmaintell Consulting, told Yicai. It was mainly because Chinese producers have been taking steps to control capacity since the third quarter of last year, cutting their capacity utilization rate to 65 percent to 70 percent, the lowest in over a decade, Li said.

Thanks to the general reduction in output, prices have already jumped over 30 percent since a record low at the end of 2022, and the profit margins of some producers have already turned positive, Li added.

But the price recovery may slow and begin to decline in the fourth quarter after the peak restocking season for downstream firms because, with an improved environment, market players will switch back to price cuts in an effort to beat competitors, Li noted.

BOE’s net profit plunged 89 percent to CNY735.8 million (USD101 million) in the six months ended June 30 from a year earlier. Operating revenue fell 12.5 percent to CNY80.2 billion.

Editors: Tang Shihua, Futura Costaglione