Small LCD panel makers could get China factories

Shares of liquid-crystal-display (LCD) panel makers jumped yesterday, led by Chi Mei Optoelec-tronics Corp (奇美電子), as the government said it is considering allowing suppliers of LCD panels for mobile phones to set up production lines in China.

"We are inclined to suggest allowing local LCD makers to invest in China, based on our initial evaluations, as the manufacturing of 4-inch or smaller panels is relatively labor-intensive," Chen Chao-yi (陳昭義), director of the Industrial Development Bureau, told reporters at the Legislative Yuan yesterday.

But the bureau has not finalized its assessment yet, he said, adding that the evaluation focuses on the impact such a policy change would have on the job market and capital situation.

The bureau will submit its evaluation to a special panel com-prised of government officials, industry professionals and academics for further discussion, he said, without giving a timeframe.

On the local bourse, Chi Mei shares shot up 3.88 percent to NT$53.50 yesterday, outperforming the TAIEX's 3.11 percent gain.

AU Optronics Corp (友達光電), the world's No.3 supplier of LCD panels, climbed 2.85 percent to NT$50.50.

"AU got a boost from several factors, including the govern-ment's plan to let up the restrictions and the news that AU received new orders from handset giant Motorola," said Alex Wu (吳興國), an analyst with KGI Securities (中信證券).

But Wu said he held a neutral stance about the possible policy-relaxing, as poor labor quality in China remains a concern for investors.

In late April, AU Optronics vice president Lu Po-yen (盧伯彥) told investors that the company is targeting the world's top three mobile-phone vendors to supply flat screens.

Lu said the company aims to ship 1 million handset flat screens per month. It plans to ship 36 million small and-medium flat screens this year.

Chi Mei, centering on large-size TV panels, also aims to diversify into panels for handsets, DVD players and digital cameras.

The Tainan-based company hopes to boost sales of those small-size screens to make up 5 percent of its total sales of NT$150 billion this year.

Chunghwa Picture Tubes Ltd (中華映管), the nation's third-largest supplier of LCD flat panels, is also setting eyes on high-margin small and-middle-sized screen market. The company expected to ship 3 million units this year.

Global demand for LCD panels used in color-display cellular phones is expected to rise by 6.5 percent to around 656 million units this year from 596 million last year, market researcher DisplaySearch said earlier this month.

The government is also considering easing its grip on low-end semiconductor testers by allowing companies to invest in the Chinese market in order to stay competitive.