AUO confirms stake in LED packager

AU Optronics Corp (AUO, 友達光電), the world's third-largest flat-panel maker, yesterday confirmed that it has taken a major stake in a local light-emitting diode (LED) chip packager as part of its efforts to save on costs.

AU Optronics' latest move came after local rival Chi Mei Optoelectronis Corp (奇美電子) obtained a major stake in a local LED chipmaker, Formosa Epitaxy Inc (璨圓光電), in the middle of June.

"We invested in a LED firm recently," said Hsiao Ya-wen (蕭雅文), an AUO public relations officer, in a phone interview.

Hsiao's remarks came in the wake of a report in a Chinese-language business daily, the Commercial Times, yesterday that the company had acquired a 25 percent stake in LightHouse Technology Inc (凱鼎科技), which has NT$342 million (US$10.44 million) in capital.

Hsiao confirmed the purchase, but declined to provide details about the deal.

The newspaper said that AU Optronics paid NT$12 per share for the 25 percent stake, which translates into an investment of NT$102.6 million.

Hsinchu-based LightHouse was set up in January 2003 by a team of technology specialists who used to work at Unipac Optoelectronics Corp (聯友光電).

Unipac merged with Acer Display Technology Inc in 2001, thuscreating the nation's biggest liquid-crystal-display (LCD) panel maker which was renamed AU Optronics.

AUO and Chi Mei are investing for the future as LED chips are expected to overtake lamps as the main backlight source for computer and television panels over the next few years.

Both companies have been trying to vertically integrate their operations by strengthening internal supply of key components, including lamps and driver chips, to improve their cost structure and better manage the sharp fluctuations in the LCD industry.

AUO has a lamp manufacturing affiliate, Wellypower Optronics Corp (威力盟). AUO also has access to lower-cost LED chips through Wellpower's shareholding in Highlink Technology Corp (連勇科技).

"It's good for panel makers to invest in LED companies, as they will have a secure supply of LED chips when the market takes off at a cost of only several million dollars, which is cheap compared to investing hundreds of billions to build a factory," said Lin Chin-hsun (林志勳), who tracks the LCD component industry for the government-funded Industrial Technology Research Institute (工研院).

Lin expects LED chips to overtake lamps as the major backlight source for panels used in laptops in the first quarter of 2008. LED chips are commonly used in mobile phone panels.

Shares of AU Optronics and Chi Mei advanced 2.51 percent and 4.52 percent to NT$49 and NT$39.25, respectively, yesterday, outpacing the benchmark index which posted a 1.3 percent gain.