January 24, 2011 (JoongAng Ilbo)

[Korea’s Venture Giants: Fourth in a ten-part series] ‘We hope to be a small yet strong firm that never stops moving forward.’ – Kim Hong-in

One element that is becoming increasingly more important in IT devices is the display.

Displays have improved in almost all aspects – size and thickness as well as touchscreen sharpness and responsiveness.

The display has emerged as something that consumers now consider before making purchases. And even the most tech-illiterate person will know about LCDs, LEDs and PDPs when searching for a new TV.

For smartphones, the equivalent is Retina, Amoled and TFT-LCD.

Korea Nitto Optical is an IT venture located within an industrial park in Pyeongtaek, Gyeonggi, about 70 kilometers (43.5 miles) south of Seoul.

The company makes the polarizing film used in TFT-LCD screens. TFT-LCD is a variant on LCD screens with improved image quality and is used in televisions, computer monitors and mobile phones.

Polarizing films are a key ingredient in TFT-LCDs. Basically, these films help convert light with undefined polarization into light with well-defined polarization.

Korea Nitto Optical was established in November 1999 as a joint venture with a 51 percent stake belonging to Nitto Denko.

Those that are not familiar with Korea Nitto Optical will most likely have heard of Nitto Denko. The Japanese technology powerhouse based in Osaka has been making optical films for LCDs, functional automotive materials and surgical tape since 1918.

With operations in 27 countries, Nitto Denko’s sales for fiscal 2009 reached $7.27 billion. Nitto Denko had long been the No. 1 supplier of TFT-LCD polarizers in the world but was overtaken by Korea’s LG Chem in 2009.

One could say that Korea Nitto Optical was ahead of its time. It was around 2004 that the world’s major suppliers of TFT-LCD polarizers – such as Taiwan’s Optimax, Japan’s Sanritz and Sumitomo – began to make inroads into the Korean market amid the booming LCD business.

Korea Nitto Optical started mass production of TFT-LCD polarizers in 2000. By 2005 it had already completed construction of its second production facility in Hyeon-gok District with an investment of some 100 billion won ($89.2 million). The first production facility was built in Eoyeon District. Both facilities are within the industrial park in Pyeongtaek, Gyeonggi.

Its orders were growing. The company’s biggest client was, and still is, Samsung Electronics. Like most other technology companies in Korea at the time, Samsung was expanding its business in the early 2000s in the aftermath of the 1997-98 financial crisis.

Korea Nitto Optical’s Hyeon-gok and Eoyeon plants are both within a 30-minute drive from Samsung Electronics Cheonan and the Asan Tangjeong production facility – an apparent strategic choice.

“We hope to be a small yet strong firm that never stops moving forward in spite of the rapidly changing industry environment,” said Kim Hong-in the co-CEO at Korea Nitto Optical. “Furthermore, being a joint venture we hope to contribute to the joint economic development of Korea and Japan as well as technological cooperation between the two countries.”

Kim and Oka Takahiro are the CEOs at the firm.

Korea Nitto Optical is certainly “small yet strong.” Its sales were 859.9 billion won for fiscal year 2009, which runs from April 1 to March 31, and 750.5 billion won for 2008, making it the fourth largest venture in Korea in terms of sales, according to the Small and Medium Business Administration.

Back in 2000, the company posted a mere 10.9 billion won in sales, but the figure grew to 216.8 billion won in 2003 and reached 399 billion won in 2006. Such steady upward momentum is notable given the volatile nature of the business.

“The TFT-LCD sector is extremely cost-conscious with highly elastic demand; therefore, it depends on the continuation of falling cost structures and product prices to drive new demand,” wrote Kerry L. Cunningham, a product marketing engineer at AKT – an Applied Materials company – in Solid State Technology Magazine.

But it is not just the numbers that make Korea Nitto Optical a venture to watch. It has maintained a productive relationship with Samsung Electronics since its early years. It received “exemplary partner company” awards from Samsung numerous times – in 2002, 2005, 2007 and 2008.

Korea Nitto Optical has yet to announce its 2010 earnings, but last year was not a good year for the LCD industry. Prices of most LCD panels fell during the second half of last year, as weaker-than-expected demand for TVs and personal computers caused an oversupply in the market.

“We expect increased oversupply and price declines in the memory market, as well as the possibility of further declines in LCD panels,” Robert Yi, head of investor relations at Gartner, a U.S. market researcher, said recently in a teleconference. “Combining these with a possible appreciation of the won, we expect fourth-quarter conditions to be difficult.”

But the worst may be over.

Chang Won-kie, president of Samsung Electronics’ LCD unit, told reporters that LCD panel prices will likely recover faster than expected.

“The LCD market will rebound around March or April and a rise in [panel] prices will likely precede the market rebound,” Chang told reporters in Las Vegas on the sidelines of the Consumer Electronics Show.

Gartner estimates that global TFT-LCD polarizer sales in 2010 were $5.95 billion and expects the figure to surge to $6.25 billion this year and $6.34 billion in 2012.

By Kim Hyung-eun [hkim@joongang.co.kr]

http://joongangdaily.joins.com/article/view.asp?aid=2931362