Wed, Aug 28, 2013 - Page 14 News List

Innolux expecting consolidation

CHINESE COMPETITION:President Wang Jyh-chau sees an opportunity, not danger, in the entrance of more manufacturers into the market, while analysts see falling prices


Innolux Corp (群創光電), a screen maker that analysts estimate will return to profit after four years of losses, said it expects rising capacity from Chinese manufacturers will lead to consolidation.

“When there’s tough competition, it means some won’t survive and through that, production capacity could become available,” Innolux president Wang Jyh-chau (王志超) said in an interview on Monday at the company’s headquarters in Miaoli County. “What you see as danger is actually an opportunity.”

Chinese panel makers such as BOE Technology Group Co (京東方) and TCL Corp’s Shenzhen China Star Optoelectronics Technology Co (華星光電) are challenging market share leaders in Taiwan and South Korea with plans to ramp up production.

Beijing-based BOE last month said it would sell as much as 46 billion yuan (US$7.5 billion) in shares to finance expansion of plants making displays with low energy consumption and high-definition capabilities.

Between six and eight new plants in China will start producing panels in the next two years for screen sizes between 40 and 55 inches, market research firm TrendForce wrote in a report on Thursday last week.

“In large panels, the Chinese producers are coming in, making prices weaker,” Hong Kong-based Sanford C. Bernstein & Co analyst Alberto Moel said. “Prices weakened in the past six months and I expect them to weaken further.”

Global display panel shipments are projected to fall 7.4 percent from a year ago to 698 million units this year, Santa Clara, California-based DisplaySearch said on Wednesday last week.

Innolux customers stocked up on excessive inventory in the first six months of this year, Wang said.

“There is a need for consolidation or strategic alliance in some ways in the panel industry, probably on a global or cross-border level,” said Jack Huang (黃日燦), a Taipei-based partner at law firm Jones Day (眾達國際). “And the pressure for movement in that direction is mounting.”

Partnership talks with Chinese companies have stalled because of curbs by Taiwan’s government, Wang said.

Taiwan restricts Chinese investment in certain industries, such as display panels and semiconductors, on concern China’s companies may obtain strategic technologies.

“China has money and Taiwan has technology, so there are plenty of cooperation opportunities,” Wang said, without identifying firms Innolux may seek partnerships with.

Shenzhen China Star Optoelectronics Technology bought a Shenzhen facility for US$17.7 million and 334.5 million yuan from Chunghwa Picture Tubes Ltd (中華映管), the seller said in a statement to the Taiwan Stock Exchange in March.

Innolux is projected to report net income of NT$14.8 billion (US$493.6 million) this year, according to the average of 22 estimates in a Bloomberg survey, compared with a NT$29.2 billion loss last year. The company is looking to screens for smartphones and tablets to help it return to profitability.

The company’s capital expenditure will be between NT$20 billion and NT$30 billion next year, compared with a projected NT$20 billion this year. Most of the spending will be on expanding existing plants, Wang said.

Taipei-based Nomura International analyst Peter Liao (廖哲宏) said the company’s focus on premium TV panel products, including higher-resolution technology, has improved its product mix.

“If this strategy works, this is going to differentiate them from the China panel makers,” he said.

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