Rivals will beef up patent suits, analysts caution

Taiwanese slim-screen makers should brace for more patent rights lawsuits in the future, with their Japanese and South Korean rivals increasingly resorting to legal means to curb intensified competition from rapidly expanding local companies, analysts warned yesterday.

Chi Mei Optoelectronics Corp (奇美電子), Taiwan's second largest maker of liquid-crystal display (LCD) panels, is the latest company to be embroiled in a legal spat over the alleged infringement of patent rights.

On Thursday, Japan's Semiconductor Energy Laboratory (SEL) filed an injunction request in Tokyo against Japanese retailer Seiyu to prevent it selling 27-inch LCD TVs that use Chi Mei's panels, claiming that the Taiwanese company is infringing on a patent it holds.

"I don't expect such patent lawsuits to severely hurt Chi Mei, or other Taiwanese panel makers. I'm neutral about those lawsuits at this point," said Robert Lin (林家宇), an analyst with Yuanta Core Pacific Securities (元大京華證券).

In Chi Mei's case, 27-inch LCD panels only account for 5 or 6 percent of the company's total sales, according to Lin's estimate.

Chi Mei spokesman Eddie Chen (陳彥松) yesterday confirmed that the possible impact on Chi Mei would be minor, as the bulk of its panels are shipped to markets other than Japan.

"But it is becoming a norm that those multinationals tend to use legal tools to slow down Taiwanese companies' expansion, as industry leaders in the chip industry have been doing for years," Lin said.

Before Chi Mei, other Tai-wanese thin-film-transistor (TFT) LCD panel makers, including AU Optronics Corp (友達光電) and Chunghwa Picture Tubes Ltd (中華映管), have faced similar patent-right infringement charges. No final ruling has been delivered in any of these cases.

This time, Chi Mei's aggressive moves in selling its LCD TV panels to Japan's retail chains at greatly reduced prices could pose a threat to Japanese LCD manufacturers, which are less competitive in cost efficiency than their Taiwanese rivals, Lin said.

Chi Mei is expected to overtake LG Philips LCD Co to become the world's No. 2 LCD TV panel supplier in the current quarter after Samsung Electronics Co, market researcher DisplaySearch forecast earlier this month.

Annabelle Hsu (徐美雯), a senior TFT-LCD industry analyst with the Institute for the Information Industry (資策會), held a more cautious view.

As competition in the LCD sector has intensified as a result of overcapacity, similar patent issues will increase in a bid to hamper Taiwanese companies' attempts to enter new markets or move into more advanced technologies, Hsu said.

Chi Mei shares fell by 1.85 percent to NT$42.5 on the Taiwan Stock Exchange yesterday.