Chunghwa Picture Tubes calls on rivals to collaborate on component purchases

Chunghwa Picture Tubes Ltd (中華映管), Taiwan's third-largest flat-panel maker, yesterday called on local competitors to collaborate with it on component purchases as part of cost-saving efforts to fend off intensifying competition.

Chunghwa issued the call as five major Taiwanese makers of liquid-crystal-display (LCD) panels posted losses totaling NT$14 billion (US$443 million) in the fourth quarter of last year amid tumbling panel prices, while their bigger Korean rivals still managed to eke out profits.

"Everyone should sit down and think about how to improve our performance, as local companies, sandwiched between bigger Korean players and rising Chinese entrants to the market, are now facing enormous challenges," Huang Tuoh-chung (黃拓中), a manager at Chunghwa Picture Tubes, said in a speech at a seminar in Taipei organized by market researcher DisplaySearch.

Compared with Korea's Samsung Electronics Co and LG Philips LCD Co, the world's two biggest makers of LCD panels for computers and televisions, local companies have weaker cost-control abilities, because they rely more heavily on component supplies from outside companies, Huang said.

"To save costs, local panel makers should collaborate to format a standard for key components, which will allow collaboration in buying components at lower prices," Huang said.

But the suggestion seems to be a makeshift measure, compared with the option of consolidation among the five players, which would be a more effective way of improving profitability, analysts say.

Hsiung Hui (熊暉), a vice president of AU Optronics Corp (友達光電), the nation's largest maker of thin-film-transistor liquid-crystal-display panels, said that, rather than waiting for prices to rebound, aggressive cost-saving efforts are crucial for survival in the highly cyclical LCD industry.

Hsiung said he had doubts about the feasibility of Huang's suggestion.

"It would be difficult to standardize specifications of key components, as that will involve sharing technologies," Hsiung said.

To save costs and avoid supply constraints, most Taiwanese flat-panel makers have started manufacturing their own color filters, a key component in the manufacture of LCD screens, in stead of totally relying on supply from outside.

In addition, they are also seeking closer ties with their component suppliers including getting a control in the boards. AU Optronics is a marked example. The company got a major 12-percent stake in Wellypower Optronics Corporation (威力盟), the biggest lamp supplier to AU Optronics, last month.

Shares of Chunghwa Picture Tubes were up NT$0.05 at NT$13.70 yesterday, while AU Optronics rose NT$0.30 to NT$49.40.