Notebook makers likeSharp move

The world's largest maker of "driver chips," Japan's Sharp Corp, announced it would boost production by 50 percent before the end of the year to meet strong demand for the components, sending some Taiwan display makers' stocks up amidst a bear market.

The chips function as the bridge between liquid crystal displays (LCDs) and CPUs and are key components in Internet appliances and notebook computers.

The company said it would raise production of driver chips to 30 million units per month by the end of the year from 20 million currently. The company indicated it might also outsource some manufacturing to foreign companies in order to boost supplies further.

One of the companies that is best positioned to receive a direct order of driver chips from Sharp in Taiwan is Winbond (華邦電子), according to analysts, but Winbond company spokesman Mike Liu (劉重光) was unable to comment on the report.

Other Taiwanese component makers should also see benefits from Sharp's production increase, especially the nation's seven TFT-module makers, a part critical to LCD production. According to Jane Chen, analyst at Schroeders Asset Management Firm, the TFT-LCD screen industry suffers from a chronic under-supply of driver chips.

Taiwanese companies might not profit from the increased supply of driver chips, however, as "TFT-LCDs should be in oversupply because there has been a lot of aggressive capacity expansion by the Koreans and Taiwanese," Chen said.

For years the price of TFT-LCD screens has been "pretty stable" because the "driver chip shortage made sure companies could not get hold of the vital component and create an oversupply situation,"Chen said Now that Sharp has increased the driver chip supply, a lot of TFT-LCD makers will increase production.

That could drive down the overall price of TFT-LCD screens. Chen said Taiwan companies could see profits in the near term only so long as "the supply of driver chips does not rise too high." An oversupply of TFT-LCD screens would offset potential profits from increased production.

According to Sam Sun, sales manager at Acer Display (宏科技) the driver chip functions as part of the TFT-module used in LCD screens made for notebook computers. The chips are necessary to convert signals from the computer to the screen. Taiwan has been able gain outsourcing in TFT-LCD screen components from Japan due to high labor costs there. Sun said the technology used in Acer Display TFT-LCD screens came from Japan and that his company works closely with Sharp.