Panel industry cold to consolidation proposal

The government is mulling ways to help reduce the number of firms in the liquid-crystal display (LCD) panel industry, but critics say that without substantial incentives, talk of consolidation or even setting up industrial holding companies composed of domestic players rings hollow.

In a bit to compete with big foreign rivals such as Samsung Electronics Co and LG Philips LCD Co, the government recently proposed encouraging a reduction in the number of thin-film-transistor (TFT)-LCD panel suppliers through the formation of holding companies.

But industry watchers are skeptical.

"I don't expect any mergers to occur this year. Only a severe downturn causing massive losses will force weak players out of the market," said Roger Yu (游智超), an analyst with Polaris Securities Co (寶來證券), during a phone interview with the Taipei Times.

The recent industry trough was apparently not severe enough to prompt any single player to think of pulling out of the market, Yu said.

"Besides, there's still a ray of hope," Yu said, citing a potential for a boom in the LCD TV market.

Actually, none of Taiwan's major players have entirely given up hope of making a fortune from fast-growing demand for slim LCD televisions to replace bulky cathode-ray-tube TVs, he said.

The recent industry downturn caused NT$14 billion in losses for local panel players, led by AU Optronics Corp (友達光電), although Samsung Electronics and LG Philips LCD Co, the world's two biggest LCD makers, managed to eke out profits.

Frank Wang (王安亞), an analyst with Morgan Stanley, also said, "It'll be a tough task for the government to prompt any acquisitions or mergers, as there are no substantial incentives."

These companies are only at the stage of pondering how to lower risk while pouring more money in building next-generation plants, which will cost a fortune, Wang said.

"A feasible approach to reduce risk for local players would be to jointly set up new factories. At least, this is an easier way, compared to mergers, or acquisitions," he said.

David Chou (周定輝), president of smaller player HannStar Display Corp (瀚宇彩晶), agreed with Wang.

"This is an alternative worth trying," Chou said, but added that his company was not in talks with any other firms to partner in building new plants.

Chou, however, disagreed with the government's suggestion, saying that setting up a holding company would not solve the existing problem of overcapacity.

"It's not a final solution to digest additional capacity," Chou said.

He said the fundamental problem was a lack of large international TV brands controlled by Taiwanese firms to absorb the extra production.

HannStar is trying hard to find a way out, setting up TV brand HannSpree last year, but that was not enough, he said. It would be faster if the government financed private companies to help them buy into international vendors, Chou said.