HannStar to sell plant to Wintek Corp

HannStar Display Corp (瀚宇彩晶), the nation's smallest maker of flat panels, yesterday agreed to sell a manufacturing plant to Wintek Corp (勝華), the nation's biggest mobile phone panel maker, for NT$6.1 billion (US$186 million) in cash and stock.

Under the terms of the deal, Wintek will pay HannStar NT$5.2 billion in cash and 32 million common shares worth NT$900 million, or a 3.1-percent stake in Wintek, to HannStar in exchange for its third-generation (3G) plant.

With the cash injection, HannStar would be able to concentrate on manufacturing thin-film-transistor liquid-crystal-display (TFT-LCD) panels for computers and televisions, the company said.

"We are carefully considering recommencing construction of a next-generation plant some time next year as demand [for LCD TVs] looks quite good in the fourth quarter," HannStar chairman Chiao Yu-chi (焦佑麒) told reporters at a press briefing yesterday.

HannStar halted the construction of a sixth-generation (6G) plant in Tainan to cope with the recent overcapacity-driven downturn which began in the second quarter of last year.

Chiao said that the 6G factory could be upgraded to a 7.5G factory to make larger-sized glass substrates for LCD TVs.

In turn, Wintek, the world's No. 2 supplier of handset panels, will increase production by an additional 55,000 sheets of 550mm by 660mm TFT-LCD panels per month.

Wintek currently makes 2.2 million mobile phone TFT-LCD panels a month.

"We have to increase capacity to cope with growing demand from customers as color TFT-LCD panels for handsets are rapidly replacing older panels," said James Chen (陳政慧), a Wintek financial executive.

Wintek said it supplies panels to the world's three largest mobile phone vendors: Nokia Oyj, Motorola Inc and Samsung Electronics Co.

Eric Lin (林宜正), who tracks the flat-panel industry for Yuanta Core Pacific Securities (元大京華證券), said the deal would create a win-win situation for the companies.

"HannStar will be able to cut its losses and enhance its financial status by selling a loss-making plant," Lin said.

For Wintek, the new plant was a must for future growth, he said. However, he cautioned that the newly acquired plant would not become profitable right away.

"No capacity means no orders. However, I doubt Wintek will be able to land sufficient orders to fill the capacity of the new plant in the near term," Lin said.

HannStar said it would book gains of NT$3.6 billion from the asset sale for this year.

"Now I am more certain that we will be able to get back in the black," HannStar president David Chou (周定輝) said.

HannStar has posted a total loss of NT$12.35 billion over the past six quarters.