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Chi Mei to invest US$400 million in Ningbo facility

Chi Mei Optoelectronics Corp (奇美電子), the nation's second-biggest maker of flat-panel displays, said yesterday the company has secured approval from China to invest an additional US$400 million (NT$13.2 billion) in a complex that will be constructed in Ningbo, Zhejiang Province.

"The US$400 million will include the company's own capital and financial leverage such as bank loans. The investment is aimed at expanding the Ningbo complex's LCD module production capacity," a Chi Mei spokeswoman said.

The spokeswoman declined to elaborate on further financial details of the project.

The company has invested US$90 million in the Ningbo plant, which churns out some one million units every month.

By the end of March, monthly capacity at the Ningbo plant is expected to reach 1.35 million units.

The spokeswoman said another US$400 million investment plan for a LCD module plant located in Foshan, Guangdong Province, is pending approval from Chinese authorities.

Chi Mei is also building a US$30 million plant in Foshan that is scheduled to begin operations in the second half of this year with a monthly capacity of 1 million units.

Meanwhile, Chi Mei will borrow at least NT$50 billion (US$1.5 billion) to build a liquid-crystal-display factory in Taiwan, the company said.

The company will require a loan of about NT$10 billion more than originally planned, said Eddie Chen (陳彥松), a spokesman for Tainan-based Chi Mei. He declined to give further details.

Catching up

Chi Mei, which has the fourth-biggest market share of flat-panel makers, needs the increased capacity to catch up with rivals AU Optronics Corp (友達光電), LG Philips LCD Co and Samsung Electronics Co Ltd.

Electronics makers are the biggest borrowers in Taiwan, soaking up US$6.4 billion in loans last year.

"In this industry, you have to keep investing every year to keep up with the newer technology to stay competitive," said Nicholas Teo, an analyst at Macquarie Securities Ltd in Taipei.

The flat-panel maker will borrow NT$52.5 billion for seven years, according to two bankers with direct knowledge of the deal.

The loan pays an interest margin of 57 basis points more than the 90-day primary commercial paper rate, a benchmark for Taiwan loans, the bankers said.

A basis point is 0.01 percentage point.

The manufacturer utilized 20 banks, including Bank of America Corp, HSBC Holdings Plc, Bank of Taiwan, Chinatrust Commercial Bank and First Commercial Bank to arrange the loan, the bankers said, declining to be identified before a public announcement was made.

11 percent Share

Chi Mei had 11 percent of the market for LCD panels at the end of last year according to DisplaySearch, a technology industry researcher based in Austin, Texas.

Samsung is the biggest producer with a 20 percent market share, followed by LG Philips with about 19 percent and AU Optronics with 16.7 percent, according to Display Search.

Chi Mei is also planning to raise about NT$25.6 million by placing as much as 800 shares to finance the new plant, it said in a statement last month.

The company will begin mass production at the plant in the fourth quarter of this year, the statement said.
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