Fri, Aug 22, 2003 - Page 11 News List

US$2.3bn for AU Optronics's 6G plant

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U Optronics Corp (友達光電), the world's fourth-largest maker of flat-panel displays, said it will spend US$2.3 billion on a factory to produce television-sized screens, challenging rivals such as Sharp Corp and LG Philips LCD Co.

The manufacturer becomes the third company to build a so-called sixth-generation plant after Sharp and LG Philips LCD.

The factory is the first stage of an NT$200 billion (US$5.8 billion) investment by AU Optronics at a site at Taichung. The investment comes as computer makers such as Dell Inc and Hewlett-Packard Co are preparing to start selling flat-screen TVs this year, according to AU Optronics, increasing competition in the US$37.7 billion flat-panel display industry.

"All of the information technology companies are going to get in this business," said Hsiung Hui (熊暉), a vice president at AU

Optronics.

"Companies with the marketing channels can make the best pro-fits," Hsiung said.

Annual sales in the flat-panel industry will grow at an annual rate of about 19 percent until 2007 as demand rises for flat-screen TVs to replace bulky cathode-ray tube models, market researcher DisplaySearch forecasts.

Sixth-generation plants use larger glass plates from which to cut screens, paring costs for television panels measuring 32 inches diagonally and higher.

Increasing competition will pare margins for flat-panel TV producers, Hsiung said.

Sharp's 20-inch Aquos flat-panel TV has a suggested price of ?142,000 (US$1,202), according to the company. AU Optronics said that after its new plant enters production in the first half of 2005, the price of a 32-inch flat-screen TV will fall to about US$1,000.

"It will be difficult for companies in the flat TV business to maintain 50 percent margins," Hsiung said.

AU Optronics, the nation's biggest flat-panel maker, and its smaller rivals such as Chi Mei Optoelectronics Corp (奇美電子) make most of their revenue from monitors for personal computers. They are shifting more resources into TV panels, which yield better profits.

AU Optronics said that TV screens accounted for 1.3 percent of its sales in the second quarter this year. South Korea's Samsung Electronics Co is the world's biggest flat-panel maker, followed by LG Philips LCD and Sharp, based on last year's sales.

AU Optronics has raised enough money to finance its sixth-generation plant and another factory under construction that uses older fifth-generation production equipment, according to chief financial officer Max Cheng (鄭煒順).

"We will have about NT$120 billion in cash on hand by the end of this year," he said.

The company has raised about NT$45 billion from syndicated loans and the rest of the NT$80 billion that will be invested in the sixth-generation plant will come from the company's internal cash flow, Cheng said. He said the company may consider selling debt to help refinance loans.

AU Optronics this month quadrupled its pretax profit forecast for this year to NT$10.5 billion after recording second-quarter net income of NT$2.9 billion.

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