, was granted approval by the Taiwan government Friday to set up its first plant in China. This means that AUO will now be able to commence work on a US$3 billion plant in Kunshan, Jiangsu Province, eastern China, to manufacture 7.5th generation flat panels. However, the approval for AUO to set up business in China came several weeks after the world's two largest flat panel makers, Samsung Electronics and LG Display of South Korea, obtained permission from Beijing to establish 7.5G and 8.5G flat panel factories in China, respectively. The following are excerpts from local media coverage of the issue: Economic Daily News: For the first time, the Taiwan government gave approval for a large flat panel manufacturer to invest in China. Chimei Innolux Corp., another Taipei-based flat panel producer, is next in line. With AUO scheduled to begin mass production in Kunshan in 2012, a full-blown flat panel war could erupt by then in the Chinese market between Taiwan and South Korean companies. Expressing delight and relief at the approval, AUO urged the government Friday to also lift the current restrictions on fab generation and M&A (merger and acquisition) investments in order to give Taiwanese manufacturers more flexibility in their global business strategies. AUO said that in the face of strong competition from foreign businesses, Taiwanese panel makers have limited time to develop a competitive edge in China. (Dec. 18, 2010). China Times: It took the Ministry of Economic Affairs (MOEA) nine months to complete its review of AUO's China investment plan. The ministry did not want to approve the project unless the company made a commitment to deliver on its promise to invest NT$400 billion (US$13.4 billion) in two 11th-generation flat panel plants and solar energy facilities in the Central Taiwan Science Park by 2022. The MOEA wanted AUO to prove 'its love for Taiwan' before investing in China. However, AUO has lost time in the race against its South Korean competitors. In addition, domestic businesses are worried that Taiwanese flat panel makers in China, which is the world's largest market for that product, would not be able to compete with South Korean companies in the fab generation and production process. (Dec. 18, 2010). Commercial Times: Addressing rumors that AUO would merge with an optoelectronics company affiliated with the Kunshan City government, Vice Economics Minister Hwang Jung- chiou said that the MOEA has determined that no Chinese capital will be used in the establishment of AUO's plant in Kunshan. It was because of this issue that the MOEA took as long as it did to approve the project. Another reason was that the government was also concerned that AUO would not keep its promise to invest NT$400 billion in the Central Taiwan Science Park. (Dec. 18, 2010). 