AU Optronics Corp (AUO, 友達光電), the nation’s No. 2 LCD panel maker, has filed an application with the Ministry of Economic Affairs to buy a stake in China-based Longfei Optoelectronics Co (龍飛光電), the ministry said yesterday.
According to the ministry, AUO formally sought approval from the ministry’s Investment Commission two days earlier to acquire a share of Longfei in Kunshan, Jiangsu Province, for US$796 million.
AUO is the first local company to seek to become a shareholder in a Chinese counterpart after the government relaxed China-bound investment rules in March to allow local flat-screen and -semiconductor manufacturers to acquire stakes in Chinese companies amid closer cross-strait economic ties.
The ministry said AUO is not expected to secure a majority stake in Longfei through the investment, but will still be able to have a say in the management of the company.
However, the ministry declined to disclose the size of the stake AUO is eyeing.
An advanced 8.5G plant in Longfei making large panels for TV use is scheduled to start operations at the end of next year.
Market observers said the Chinese stake is expected to result in great savings for AUO, which is eager to operate flat-panel production facilities in China to enhance its global competitiveness, as there will be no need for the Taiwanese firm to spend the more than NT$100 billion (US$3.48 billion) required to set up an 8.5G plant on its own.
As a result, AUO has simultaneously applied to the ministry to withdraw an investment plan for building a flat-panel plant in Kunshan, the ministry said. The government approved the Kunshan investment plan in December last year.
The observers said the company’s move to acquire the Longfei stake instead of establishing its own production facilities is expected to reduce pressure on its financial condition, particularly after the company posted a net loss of NT$13.9 billion in the first quarter on falling TV panel prices.
The ministry said it would evaluate the AUO investment plan as soon as possible.
Separately, AUO yesterday posted a preliminary consolidated revenue of NT$33.17 billion for last month, down 7.7 percent month-on-month and 19.4 percent year-on-year.
Last month, the company’s shipments of large panels used in desktop monitors, notebook PCs and LCD TVs numbered about 9.98 million units, a decrease of 6.8 percent from the previous month, AUO said in a statement.
Shipments of small and -medium-sized panels dropped 15.9 percent month-on-month to about 14.11 million units, the company said.