Controversy is mounting over plans by Samsung Electronics and LG Display to build LCD plants in China. The electronics giants say they need to build the factories, or they risk losing the Chinese market to Japanese and Taiwanese rivals. But the government is concerned about potential leaks of key technologies to China.

Businesses need government permission to build overseas plants for high-tech products like memory chips or LCDs. The government apparently wants the two companies to build the plants at home in order to create more jobs.

LG Display wants to invest W4.7 trillion (US$1=W1,181) to build an eighth-generation LCD plant in Guangzhou, which will go into operation in 2012. Samsung Electronics plans to build a 7.5-generation factory in Suzhou by 2011 with W2.6 trillion.

China's emergence as the world's largest TV market has drawn the attention of the Korean companies. Market researcher DisplaySearch predicts that China's share of the global LCD market will jump from 12.7 percent in 2008 to 21.1 percent by 2013. Furthermore, the Chinese government is trying to attract Korean and Taiwanese display makers with exceptional business incentives worth W20 trillion.

In a meeting with the chiefs of display companies on Monday, Knowledge Economy Minister Choi Kyung-hwan said, "Having plants in China would surely help Korean manufacturers penetrate the Chinese market before their rivals, but it could also result in excessive supply, reduced domestic investment and the transfer of key technologies."

Choi said the government will decide on whether to allow the construction of the plants after considering ways to boost domestic investment and prevent technology leaks.

"China has yet to develop LCD production technology," a ministry official said. "If Korean LCD technology is leaked to China, Chinese TV makers would be able to quickly sharpen their technological edge and catch up with Korean companies. That would hurt the overseas sales of LCD TVs, one of Korea's flagship export items."