Tue, May 30, 2006 - Page 12 News List

Chi Mei says no plans for 6G this year

LCD PRODUCTION The company said an `Economic Daily News' report that it was planning to spend up to NT$100 billion to build a 6G factory this year was incorrect

By Lisa Wang  /  STAFF REPORTER

Chi Mei Optoelectronics Corp (奇美電子), Taiwan's second-largest maker of liquid-crystal-display (LCD) panels, yesterday denied a report that it planned to build its first sixth-generation (6G) plant this year to cater to growing demand for 37-inch LCD televisions.

Chi Mei, which earns half of its revenues from selling TV panels, has previously said that it plans to spend NT$100 billion (US$3.12 billion) this year in building more next-generation plants, betting on booming demand for LCD TVs with screens bigger than 40 inches.

Demand for 37-inch TVs by people with not-so-big living rooms in Europe, China and Japan are increasing amid a growing appetite to replace cathode-ray-tube TVs because of big sports events such as the World Cup and growing digital content, according to market researcher DisplaySearch.

"We have several projects under consideration. We haven't made any final decisions yet ... But we need to earmark some [6G] equipment," Chi Mei spokesman Eddie Chen (陳彥松) said in a telephone interview with the Taipei Times.

Chen's remarks came after the Chinese-language Economic Daily News reported yesterday that the Tainan-based company is planning to spend between NT$80 billion and NT$100 billion in building a 6G factory to fend off competition from rivals.

David Hsieh (謝勤益), head of DisplaySearch's local branch, said yesterday that it would make sense for Chi Mei to build a 6G plant just to make 37-inch panels because of the stable technology and cost efficiency.

On top of that, "37-inch LCD TVs are an important segment in the TV market. Demand is strong. Panel makers should not skimp on this segment, despite the fast-growing demand for 42-inch TVs," Hsieh said.

According to DisplaySearch's forecast, sales of 37-inch LCD TVs are expected to make up 8 percent of the total 42 million sets sold this year, from less than 2 percent of 21 million units sold last year.

Chi Mei currently makes a small number of 37-inch panels at a 5.5G plant based on customer demand. Its three new factories now under construction will produce TV panels larger than 40 inches, the company said.

In comparison, major LCD panel manufacturers such as LG Philips LCD Co are producing such panels at their 6G plants, which make bigger glass substrates to be cut into six sheets of 37-inch panels, twice the number that can be cut from glass substrates made at a 5.5G facility.

Despite its plans to spend heavily on equipment this year and for the next few years, Chi Mei still won a good long-term credit rating from Taiwan Ratings Corp (中華信評), the local arm of global rating agency Standard & Poor's Rating Services.

Taiwan Rating yesterday placed a "tw-A-" long-term corporate credit rating on Chi Mei, meaning the company has "quite good" abilities to repay its long-term debts, Taiwan Rating analyst Raymond Hsu (許智清) told the Taipei Times yesterday.

The company's long-term debt maturity profile peaks next year with NT$24.2 billion in debt due that year. Taiwan Ratings expects that debt to be easily satisfied by Chi Mei's operating cash flow, Hsu said.

He gave a Chi Mei a "stable" outlook.

Chi Mei shares fell 0.27 percent to NT$37.6 on the Taiwan Stock Exchange yesterday, compared to a 2.26 percent gain for shares in rival AU Optronics Corp (友達光電), which closed at NT$47.55.

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