Flat-panel maker to invest more

AU Optronics Corp (友達光電) plans to spend up to NT$85 billion this year on new equipment and production facilities, chief financial officer Max Cheng (鄭煒順) told investors yesterday.

AU, the nation's largest manufacturer of panels for flat-screen computer displays and televisions, reported profits for the final three months of last year that surpassed the company's results for the whole of the previous year. The expenditure plan is more than double the amount the company spent last year.

The bulk of the money will be spent on an advanced sixth-generation, or 6G, thin-film transistor liquid-crystal display (TFT-LCD) production plant in central Taiwan. The fab is expected to produce panels for televisions measuring at least 32 inches diagonally by the first quarter of next year.

Money will also be spent expanding existing 5G fabs and increasing the company's investments in China, Cheng said.

The announcement comes as fourth-quarter profits last year topped NT$7.5 billion, outstripping the NT$6 billion the company booked in the whole of 2002. Yesterday's announcement took AU's unaudited profits for last year to NT$15.66 billion, a 160 percent improvement on the previous year.

Industry watchers welcomed the investment plans.

"The news is good for two reasons -- firstly investment for the future is a must to keep AU at the top of the list of global TFT-LCD panel makers, and secondly it shows AU is confident of catching up with its Korean and Japanese rivals," said Wang Chien-erh (王建二), president of the Taiwan branch of DisplaySearch.

Each new advance in technology, or generation, is becoming more expensive, Wang said, but the returns from more efficient processes and larger profit margins make the investment worth it.

AU trails South Korean man-ufacturers LG Philips LCD Co and Samsung Electronics in sales volume, and lags behind Japan's Sharp Corp in technology. Sharp is already producing larger, more profitable 6G panels, and the Koreans are expected to go into mass production next quarter at their new 6G fabs.

The new 6G fab is expected to help AU compete in the television sector. Last quarter, TV panels accounted for only 4 percent of AU's income, compared with 90 percent for computer displays, vice president Hsiung Hui (熊暉) said, adding that TV panels would not make a significant contribution until prices come down.

The average price of a large TFT-LCD television ranges between US$2,000 and US$3,000, which has stymied sales, according to Hsiung and AU chairman Lee Kun-yao (李焜耀).

"This year will not be a boom year for LCD TVs," Lee said yesterday. "It is more likely next year once [our new advanced fab] goes online." Prices need to drop to between US$1,000 and US$1,500, the executives said.