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AU Optronics to up LCD output with new plants

"As China continues to shape the global economic landscape, our Mainland China customers must have access to real-time and immediate support in order to be competitive and continue to expand their business."

Lee Kun-yao, AU Optronics chairman

AU Optronics Corp (友達光電), the world's third-biggest maker of liquid-crystal-display (LCD) panels, yesterday said it had opened its second Chinese manufacturing site to boost output of LCD modules for consumer electronics including TV sets.

The site in Xiamen, Fujian Province, includes two plants and is part of the company's move to take advantage of recovering demand to expand its production capacity.

AU Optronics also operates LCD module plants in Suzhou, China. At home, the company also has LCD panel assembly plants in Lungtan, Taoyuan County, and in Taichung.

"As China continues to shape the global economic landscape, our Mainland China customers must have access to real-time and immediate support in order to be competitive and continue to expand their business," AU Optronics chairman Lee Kun-yao (李焜耀) said in a statement.

AU Optronics said it planned to make LCD modules used in consumer electronics in the Xiamen plants this year and to expand production to include computer modules next year.

With the new plant coming into line, the production of TV modules in China would double, while that of small and medium modules would increase to 1.5 times current output, it said.

In December 2005, AU Optronics' board approved a US$50 million investment to construct the Xiamen site. AU Optronics planned to spend around NT$95 billion (US$2.87 billion) on new facilities and equipment this year and NT$70 billion next year.

By the end of this year, the Xiamen site is expected to churn out 500,000 large LCD modules a month and 5 million small and medium LCD modules, it said.

To keep up with recovering demand, AU Optronics earlier this year started outsourcing panel assembly to other Taiwanese companies such as Prime View International Co (元太科技), which has facilities in China.

Local rival Chi Mei Optoelectronics Corp (奇美電子) also said that it is accelerating its module capacity expansion in China amid the recovery in demand as it tries to reduce its costs further. Chi Mei plans to start mass production at a new module plant in Nanhai, Guangdong Province, this quarter. It also operates a module plant in Ningbo, Zhejiang Province.

AU Optronics plans to hire 500 more employees for the Xiamen plants by the end of this year.

Two weeks ago, CLSA Ltd gave AU Optronics and Chi Mei "under-performance" ratings over disappointing sales of LCD monitors and LCD TVs during peak season.

CLSA analyst Frank Su (蘇穀祥) set target prices for the stocks at NT$46 and NT$31.8 for AU Optronics and Chi Mei respectively, compared with their closing prices of NT$50.5 and 33.7 respectively last Friday.

On Thursday, AU Optronics posted record sales of NT$44.1 billion (US$1.33 billion) for last month, up 89 percent from a year earlier.

Based last month's strong sales figures, Citigroup Global Markets rated AU Optronics with a "buy" recommendation and increased its third quarter earnings forecast by nearly 40 percent, the research house said on Friday.

"We now expect AU Optronics to post a net profit of NT$21 billion and an earning per share of NT$2.77 vs. NT$0.78 in the second quarter," it said.
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