AU Optronics Corp (友達光電), the nation's No. 2 flat-panel maker, yesterday said it could be forced to halt its NT$600 billion (US$18.9 billion) Central Taiwan Science Park expansion plans after a court suspended the development of two high-tech zones.
The Taipei High Administrative Court last week ordered an immediate stop to all building activity in the two zones — Cising (七星) in Taichung County's Houli Township (后里) and Erlin (二林) in Changhua County — saying environmental impact studies were incomplete.
“Economic development and environmental protection are equally important, and what we did is aimed at pursuing the biggest benefit for society,” the court said.
The ruling is likely to deal a serious blow to AU Optronics in the battle for market share with South Korean rivals, LG Display Co and Samsung Electronics Co, as well as increasingly sophisticated Chinese competitors.
“We are upset [about the ruling],” said AU Optronics spokesperson Hsiao Ya-wen (蕭雅文) by telephone. “This will greatly impact the competitiveness of the industry and of Taiwan.”
The company's NT$600 billion expansion plans include building two 8.5-generation plants at a cost of NT$200 billion and two 11th-generation plant at a cost of NT$400 billion.
Construction has already started on one of the 8.5G plants in Cising, with mass production expected to begin next year. The plant was to be used to cut TV panels and displays bigger than 42 inches. It was expected to churn out 40,000 sheets of 2,200mm x 2,500mm mother glass per month.
“Now the schedule could be postponed,” Hsiao said. “AU Optronics can only hope the government will be sensible and solve the problem.”
“This is going to be a big headache for AU Optronics,” said Roger Yu (游智超), an LCD industry analyst with Polaris Securities Co (寶來證券).
Without new capacity to support its market share expansion, AU Optronics could be at risk of losing its market position during what promises to be a golden era for the LCD industry over next few years before LCD TV demand starts to decline after 2013, Yu said.
“I don’t see any quick solution and AU Optronics’ case again highlights the problems of land acquisition in Taiwan,” he said.
AU Optronics has captured about 16 percent of the global LCD panel market, trailing Samsung, LG Display and Chimei Innolux Corp (奇美電子), market researcher DisplaySearch's figures show.
Amid growing awareness of environmental issues, Chimei, the nation's biggest LCD panel maker, has also experienced difficulties obtaining land for expansion.
Chimei originally intended to develop a site close to its headquarters in Miaoli, but is reconsidering the plan after it became the target of protests by farmers and environmental groups last month.
The Ministry of Economic Affairs yesterday said the controversy surrounding the Central Taiwan Science Park is set to impact the nation's competitiveness in attracting global investment.
“Companies’ willingness to invest is now dampened by the land development issue ... Who should be held accountable?” Vice Minister Huang Jung-chiou (黃重球) told reporters.
The halt of the science park's development could cause businesses to hesitate before investing capital in Taiwan because of policy inconsistency.
This could jeopardize government efforts to attract more international companies to Taiwan.
Even if the National Science Council appeals against the ruling, it will take quite a long time to reach a verdict, Huang said.
The vice minister said the ministry will mediate in the issue and resolve the land concerns as it is hard to find an alternative parcel of land in Taiwan for companies to set up production facilities.
Meanwhile, the ministry said it is still reviewing AU Optronics' application to set up a 7.5-generation facility in China, adding that approval will be judged on how the firm plans to retain more advanced technology and invest more in Taiwan.
ADDITIONAL REPORTING BY JASON TAN, AFP AND CNA
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