Consolidation incentives mulled for panel industry

The government is considering offering low-interest loans, tax breaks and other incentives to encourage consolidation in the nation's liquid-crystal-display (LCD) panel industry, according to a study released by the Presidential Office.

The study, given to President Chen Shui-bian (陳水扁) and his top economics advisors on Wednesday, was prepared by Shih Chin-tay (史欽泰), a member of Chen's economics panel. But it received a lukewarm response from local flat-panel display manufacturers, who urged the government to let market forces lead the way.

Competitiveness

During a meeting with Chen and his economics panel, Shih suggested that the government encourage mergers among local flat-panel display makers to strengthen their competitiveness and reduce risk in the capital-intensive industry.

Two or three big flat-panel makers would be enough for the overcrowded sector, said Shih, who doubles as head of the Technology Management Department at National Tsinghua University.

Agreeing with Shih, Rock Hsu (許勝雄), chairman of the Taiwan Electrical & Electronic Manufacturers' Association (電電公會), said companies need to reach an appropriate scale to stay competitive. Hsu also attended the presidential meeting on Wednesday.

The nation's flat-panel display industry is suffering from excess investment, with major players such as AU Optronics Corp (友達光電) and Chi Mei Optoelectronics Corp (奇美電子) announcing delays last month in the construction of their next-generation factories.

Against this backdrop, local institutional investors remain bearish on the industry, while a foreign brokerage house forecast that Chi Mei could report a 66 percent decline year-on-year in its third-quarter earnings report.

Chi Mei is scheduled to release its quarterly report next Thursday, a day after AU Optronics releases its results.

Snubbed

AU Optronics chairman Lee Kun-yao (李焜燿) and HannStar Display Corp (瀚宇彩晶) chairman Chiao You-chi (焦佑麒), however, snubbed the government's plan to promote mergers between flat-panel display makers.

"We will consider forming alliances [with rivals] instead of pursuing mergers," a Chinese-language newspaper quoted Lee as saying yesterday. AU Optronics is the nation's largest and the world's third-largest flat-panel display maker.

There was no problem with the number of members in Taiwan's flat-panel "family," another Chinese-language business daily reported, citing Chiao. HannStar, one of Taiwan's smaller suppliers, is considered a possible acquisition target.