An agreement between CMC Magnetics Corp's (中環) and Japan's Fujitsu Takamisawa Component Ltd to make LCD touch screen panels marks a change in former's diversification strategy into the electronic component parts sector, CMC officials and securities analysts said yesterday.
CMC, a major manufacturer of optical data storage and more recently an investor in numerous Internet-related companies, signed an agreement yesterday to set up the joint venture, tentatively named Transtouch Technology Inc.
Fujitsu Takamisawa is an electronic components manufacturer and is 50 percent owned by Fujitsu Ltd.
CMC and Fujitsu Takamisawa will invest NT$500 million in the company and will own 42 percent and 43 percent stakes, respectively. After production begins in June, the new company is expected to churn out 1.1 million panels per month, a company official said.
The panels will be used in a growing number of Internet appliance devices such as personal digital assistants, Web pads and third generation mobile phones.
For Bob Wong, president of CMC and the president-designate of Transtouch Technology, the decision to jointly manufacture and sell touch screens marks a transition by the company from storage media production into key electronic components via investments in Internet companies and development of the company's own IA products.
As touch screen panels gradually replace today's keyboards and incorporate the keyboard feature within the appliance, their importance and demand will grow rapidly, Wong said.
The new product should bring in at least NT$1.5 billion in sales per year, he said.
Analysts said the move into components was a good one, and they tend to agree with Wong's optimism about the future of touch screen panels. However, they differed about the degree to which CMC would benefit.
With strong demand for touch screen panels in Japan -- and Fujitsu Takamisawa's own production line churning out 150,000 panels per month and nearing its maximum output -- Fujitsu Ltd itself as well as other Japanese companies are expected to be major customers. Fujitsu would likely do the marketing in Japan, analysts said.
However, in the agreement with Fujitsu Takamisawa, CMC is to take charge of market development, sales and strategic management, while Fujitsu Takamisawa is to provide the technology and be responsible for production and quality control.
In a joint-accord between a Japanese and a Taiwanese company, it's normally the other way round, a securities analyst said. The main customers this time are therefore likely to be from Taiwan, he said.
If so, who the other customers will be is the big question.
"The customers will probably be TFT-LCD makers," said Chien Kuo-chen, technology analyst at President Securities Corp.
"But we will need to do some research on whether CMC should be responsible for sales."
Chien said that if LCD and computer makers such as ADI Corp, Acer Inc and Quanta Computer Inc needed touch panels, it isn't clear whether they will need to go through CMC to get them. He also questioned the size of the touch panel market for larger screens.
CMC would more likely find customers for smaller touch panels to go into devices such as handsets and PDAs, Chien said. Possible customers include Picvue Electronics and CMC itself.
The touch screen panel will be used in a number of CMC's own IA products, including the soon-to-be-released Cyberboy, a PDA that incorporates a number of information application devices such as MP3 player and digital camera.
Shipments of Cyberboy will begin in October, one month later than originally planned, a company official said yesterday.
The late shipment means it will miss the Christmas market, he said.
Despite current uncertainty over customers and delayed shipments, the stock market has not reacted unfavorably to CMC's decision to move into electronic components.
CMC's stock was the most heavily traded yesterday, and the highest for the company since the end of March. The company's share price rose 5.71 percent to NT$74.
It has risen more than 22 percent since last Monday.
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