Chi Mei revives US$600m overseas share sale

Chi Mei Optoelectronics Corp (奇美電子), the nation's second-biggest maker of flat-panel displays used in computers, revived plans to sell as much as US$600 million in shares overseas this month, raising funds to invest in factories, according to people familiar with the company.

Chi Mei, which plans to sell 500 million shares in the form of global depositary receipts (GDRs), in March scrapped plans for a similar-sized sale, saying the US-Iraq war weakened demand from investors.

The Tainan-based company's shares have risen by almost 70 percent since then because of increased demand for displays used in flat-panel televisions.

Taiwan's display makers, including five companies that make notebook PC-sized panels, raised about US$3 billion this year to expand, about half the total raised by the industry globally, said Texas-based DisplaySearch.

The market researcher said annual sales in the US$37.7 billion industry will rise by an average of 19 percent a year until 2007, led by demand for televisions.

"Chi Mei is expected to benefit from the promising industry outlook for flat-panel displays in the coming year," said Richard Kao, who helps manage the equivalent of US$2.9 billion of assets for ABN Amro Asset Management Taiwan Ltd in Taipei.

He plans to buy Chi Mei stock when the price falls.

"Investors may need to take into account there could be over-capacity pressure in the future," Kao said.

Both Chi Mei and AU Optronics (友達光電) are investing in plants to keep up with South Korea's Samsung Electronics Co and LG.Philips LCD Co, the world's two biggest makers of flat-panel displays.

Chi Mei will open a factory that can make TV-sized panels this month.

It expects sales of television screens that measure up to 30 inches diagonally to account for about a fifth of its revenue this year.

Taiwan's larger display makers missed a chance to buy rivals and prevent overcapacity, which may pare profit, investors said.

"All the small players have raised funds and it looks as though consolidation will have to wait for the next downturn," said James Johnstone, an analyst with Gartmore Investment Management, which counts shares in AU Optronics among the more than US$50 billion it invests globally.

Japan's Sharp Corp, the world's No. 1 maker of flat-screen televisions, and makers in South Korea and Taiwan are opening factories that make larger glass sheets from which the screens are cut, helping pare production costs, according to DisplaySearch.

Flat screens, which will be used in about 2 percent of all TVs sold this year, will account for about 16 percent of the market by 2007, DisplaySearch said.

Quanta Display Inc (廣輝電子), owned by Sharp, and Quanta Computer Inc (廣達電腦), last month sold US$270 million of shares overseas in the form of GDRs.

HannStar Display Corp (瀚宇彩晶), the nation's fourth-largest maker of flat-panel displays, raised US$250 million this week selling bonds convertible into its stock.

Chi Mei sold US$250 million of bonds convertible into its shares in August to raise funds to build a new factory.