Ten years ago, Chi Mei Optoelectronics Corp (CMO, 奇美電子) built its first plant in a sea of rice fields in southern Taiwan in a major move by parent company Chi Mei Corp (奇美實業) to diversify into the nation’s rapidly growing high-tech industry from the stable plastics industry.
CMO has spent over US$18 billion on building 8 plants in Taiwan, helping to boost annual revenues of the nation’s second-largest liquid-crystal-display (LCD) panel maker to more than NT$30 billion last year, compared with NT$40.7 billion made in the first year of CMO’s operation.
CMO founder and former chairman Hsu Wen-lung (許文龍), who also founded Chi Mei, was fortunate to enter the LCD industry in its budding years, as pioneers usually earn a better premium.
“[The LCD industry] provides a rare opportunity … with Taiwanese companies taking center stage in the world’s [industry development],” Hsu said.
After a thriving decade, Hsu’s successor has a tougher job cut out for him, as he is expected to sustain the growth momentum in the boom-and-bust LCD industry, which is expected to see slowing growth rates over the next few years.
Overall, sales of flat panel displays made by different technologies are expected to grow 21 percent to US$123 billion this year from last year, but the annual growth rate may plunge to 5 percent next year and to 4 percent in 2010, market researcher DisplaySearch has predicted.
Like some local companies experiencing slowing growth in the stable semiconductor industry and the waning compact disc industry, CMO is considering green energy industries such as solar cell manufacturing to rekindle growth momentum.
That is not to say that CMO critically needs to diversify from the LCD panel business, but the move shows the company’s efforts to find new investment opportunity to battle a slowing growth engine.
“CMO will still have big growth in the next ten years. But, the growth will mainly come from the company’s new investments rather than the flat panel business, which will grow at a slower pace than the past 10 years,” company president Ho Jau-yang (何昭陽) told reporters.
Early this year, CMO spent between NT$4 billion and NT$5 billion building Chi Mei Energy Corp (奇美能源) to tap into the red-hot solar industry. Local rival AU Optronics Corp (友達光電) also said it was interested in investing in the solar industry, but it was still evaluating the possibility.
Chi Mei Energy plans to move in equipment late this year and to start mass production in the first half of next year, Ho said. The solar cell maker will produce about 25 megawatts of solar cells a year, he said.
Sales in the solar cell industry around the globe may expand at a composite annual growth rate of 35 percent to US$31.5 billion in 2010, from US$10.6 billion in 2006, the government-funded Industrial Economics and Knowledge Center (產業經濟與趨勢研究中心) predicted.
CMO was also leading AU Optronics in developing light-emitting diode (LED) business. In 2006, CMO spent about NT$2 billion forming LED chipmaker and backlight supplier Chi Mei Lighting Technology Corp (奇力光電).
AU Optronics spun off its LED department to create a company in April.
Recently, CMO spent NT$850 million on buying major stakes in the nation’s biggest lamp maker, China Electric Manufacturing Corp (中國電器), and its LED affiliate TOA Optronics Corp (東亞光電).
CMO is eyeing the potential growth of LEDs used in general lighting and the use of power-saving LED backlights in computers and TV flat panels, replacing the cold cathode fluorescent lamps commonly used in LCD panels now, the company said.
“It is understandable that CMO will seek to expand into solar cells because of the similarities in making LCDs and thin-film solar cell modules,” said Roger Yu (游智超), who tracks the LCD industry for Polaris Securities Co (寶來證券). “I do not feel any excitement.”
Those new businesses would not give enough strength to combat the slowing growth of the company’s core LCD business, Yu said, citing the small scale of the solar and LED units as well as intensifying competition.
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