AU secures supply of color filters

AU Optronics Corp (友達光電), the world's No.3 flat-panel manufacturer, yesterday signed a memorandum of understanding with Taiwan's largest color-filter maker to secure a stable supply of the crucial component next year.

Under the one-year agreement, the Hsinchu-based Sintek Photronic Corp (和鑫光電) will provide AU with 55,000 color filters each month, about 40 percent of the company's total capacity, Sintek spokesman Steven Chang said yesterday.

"As the supply of color filters is expected to remain tight by the third quarter of 2004, AU hopes to be on our priority list," Chang explained.

Currently, Sintek offers around 44,000 color filters a month to AU and is planning to expand its production lines in March to cater to AU's demand, the company said in a statement.

AU yesterday tried to play down the significance of the alliance and declined to reveal details.

"The deal is one of AU's efforts to secure a steady supply of color filters, which are important materials for our panel manufacturing," said Hsiao Ya-wen (?蕭雅文), a senior administration manager.

But a flat-panel analyst said the tie-up indicates the crucial role color filters play in the flat-panel sector.

"A supply crunch in color filters could hurt panel shipments," said Martha Chen (陳紅) at Primasia Securities Co. "The move also indicates that the ongoing tight supply could extend to next year."

The supply of color filters has been an important issue for panel makers as color-filter plants have lagged far behind demand, Chen said. There are also technology barriers to overcome, she added.

The AU-Sintek deal follows a 28-percent share purchase by AU's major stakeholder BenQ Corp (明基電通) in another smaller Taiwanese color filter company, Cando Corp (劍度), in early November, to serve the same purpose.

In addition to seeking an alliance with local color-filter makers to ensure sufficient supply, AU also owns an advanced fifth-generation color-filter plant in Lungtan, Taoyuan County. The plant started to ship small volumes in October and monthly production is expected to ramp up to 20,000 units this month.

To solve the supply problem, most local panel makers are also mulling opportunities to form alliances with color-filter makers, or even to operate their own factories to meet the mounting demand.

Chunghwa Picture Tubes Ltd (中華映管) said it relies on Sintek and its own factories. But to make sure of its color-filter supply in the future, Chunghwa Picture said it is in final talks with South Sintek Photronic Corp (南鑫光電) to establish a sixth-generation color-filter plant.

Chi Mei Optoelectronics Corp (奇美電子), the only Taiwanese panel maker which owns color-filter plants, will be able to keep out of the fight for the key component, the company said last month.