More than three years ago, Hon Hai Group's (
They doubted whether Innolux, the nation's smallest liquid-crystal-display (LCD) panel maker with initial paid-in capital of only NT$21.1 billion, would be able to compete with rivals most of whom possessing large-scale capacity and having two or three times as much capital.
But Innolux, which makes LCD panels at two factories in Miaoli, started to make a profit in its second year of operation with annual revenue rocketing to NT$51.4 billion last year, compared to NT$4.27 billion in 2004.
This year, Innolux aims to double its revenue to NT$100 billion.
An excellent management team, strong cost-control and its unusual business model made Innolux glow on investor's radars even before the stock's listing on the nation's main bourse, analysts said.
"We are optimistic about Innolux's long-term potential given competitive advantages from having the Hon Hai group support," said Frank Lee (李宜家), a flat-panel analyst at Deutsche Securities in Taipei.
Ahead of Innolux's initial public offering (IPO), Deutsche Securities initiated the coverage on Innolux with a "hold" rating and target price of NT$53. Innolux planned to raise NT$8.2 billion by selling 200 million new share at NT$41 per share tomorrow to purchase new equipment and repay bank loans.
"Innolux's biggest advantage lies in its highly cost-efficient LCD panel assembling and monitor business, which will be its major driver for explosive growth in the future," said Chung Chin-yu (鍾慶宇), an analyst with Fubon Investment Services.
Chung predicted Innolux would become the world's biggest LCD monitor maker in 2009 by grabbing a 40 percent market share, beating industry leader TPV Technology Ltd (冠捷), listed in Hong Kong.
"This [operation model] is completely different from other flat-panel makers," Chung said.
He suggested that investors buy Innolux.
More specifically, Innolux only makes half of flat panels it needs to make LCD monitors thereby reducing the impact from price erosion in the boom-and-bust LCD industry, Innolux president Tuan Hsing-chien (
"We believe this is the right business model," Tuan said. "And more and more companies such as Hannstar Display Corp (
Tuan, former president of the world's third-largest flat panel maker AU Optronics Corp (友達光電), has been in the thin-film-transistor (TFT)-LCD industry for more than 25 years, and has full control of the cost of every component making up an LCD panel.
Hon Hai Group chairman Terry Gou (郭台銘) hired Tuan to prepare for the establishment of Innolux after Tuan left AU Optronics in 2001.
At present, Innolux only makes flat panels used in LCD monitors and small panels used in consumer electronics, but the firm is set to expand its business to the fast-growing LCD TV market.
But, Innolux has bigger ambition to expand its business to fast-growing LCD TV market. “Innolux will not be absent from the market,” Tuan said.