Shares of the nation’s No. 2 LCD panel maker, AU Optronics Corp (AUO, 友達光電), rallied nearly 3 percent after receiving initial approval from the government over the weekend on its crucial US$3 billion investment in China.
The government’s comments on probable approval comes as local LCD panel makers faces mounting pressure to compete with South Korean rivals, Samsung Electronics Co and LG Display Co Ltd, which have gained Beijing’s approval to build advanced plants in China to produce LCD TV panels.
China is expected to overtake North America as the world’s biggest LCD TV market next year at the earliest, according to the forecast by market researcher DisplaySearch.
The stock price of AUO rose NT$0.95 to close at NT$31, while local rival Chimei Innolux Corp (奇美電子) advanced 0.52 percent, or NT$0.2, to NT$38.95 yesterday. The benchmark TAIEX inched up 0.2 percent.
The AUO’s proposal to build an advanced 7.5-generation LCD plant in China is scheduled to be reviewed in the final meeting held before the end of this year, Minister of Economic Affairs Shih Yen-shiang (施顏祥) told the legislature yesterday.
The Hsinch-based panel maker would obtain final approval, Shih said.
“It is crucial for Taiwanese companies to build factories in China, which is a fast-growing market for TVs, and TV panels are the major revenue source for every LCD panel maker,” Annabelle Hsu (徐美雯), an LCD industry analyst with market researcher International Data Center, said last week.
In the third quarter, LCD TV panels accounted for about 34 percent of global panel maker’s total TV and PC panel shipments, according to statistics tallied by the data center.
“But, there is a challenge for them too. Those companies will have to deal the problem of overcapacity in China as the government plans to issue five licenses for companies to build TV panel production lines,” Hsu added.
Import tax would be another important factor for panel makers to build factories in China, DisplaySearch analyst Zhang Bing (張兵) wrote on the DisplaySearch blog.
The Chinese government imposes a 3 percent tariff on imports of LCD panels smaller than 26 inches to protect Chinese panel makers, which have relatively small scale fifth-generation manufacturing capabilities.
With more domestic high--generation capacity being developed, import taxes on larger panels are likely to materialize in the future.