Innolux Corp (群創), a LCD panel manufacturing arm of Hon Hai Precision Industry Co (鴻海精密), yesterday said it is seeking outsourcing partners outside China to assemble premium panels used in cars and medical devices to avert potential impact from the growing trade war between the US and China.
The Miaoli County-based company made the remarks as tensions between the world’s two biggest economies has spread to electronic supply chains operating in China, with the US imposing a 25 percent tariff on US$200 billion of Chinese imports.
“The impact will be on high-end displays, such as those used in cars and medical devices,” Innolux chairman Jim Hung (洪進揚) told a media briefing in Taipei.
Photo: Liao Chen-huei, Taipei Times
“We are seeking solutions with our partners like Hon Hai and other companies to outsource assembly [of display modules] in Mexico” or manufacturing sites outside China, he said.
To circumvent the heavy levy from the US, shifting production from its Chinese plants to local fabs is also an option, Innolux said.
The company might allocate more US orders for displays used in cars to its Tainan fabs, while reducing its reliance on its Shanghai fabs, vice president James Yang (楊柱祥) said.
Innolux, the world’s No. 2 supplier of vehicle displays, counts the world’s first-tier automotive makers as its clients, including Tesla Inc and BMW AG.
Innolux last year held a 14 percent share of the world’s vehicle display market, according to IHS Markit data.
Once TVs and other electronic electronics are added to the punitive tariff list by the US, Innolux would shift more TV panel production to its Tainan fabs from its plants in Foshan, China, Yang said.
“Overall, we expect the impact will be manageable,” Hung said.
The US-China trade war is estimated to cut only a single-digit percentage off the company’s profits, he said.
Innolux yesterday raised its profitability outlook, citing a strong recovery in demand and prices.
“In recent month, we have seen client demand bounce back vigorously. A shortage of key components has capped the growth of new supply,” Hung said.
Average prices for some TV panel sizes have also rebounded, he said.
“We are therefore confident about demand for TVs and small and medium-sized [panels] in the third and fourth quarters,” he said.
The company expects quarterly profits to see growth this and next quarter, he said.
In the April-to-June period, Innolux posted a quarterly loss of NT$1.93 billion (US$62.85 million), its first in about two years.
AU Optronics Corp (AUO, 友達光電) yesterday also said that customer demand was recovering and prices were rising after two quarters of inventory adjustments.
“Customer demand is strengthening as the industry enters its peak season in the second half,” AUO chairman Paul Peng (彭双浪) said at the Touch Taiwan 2018 Display International Exhibition in Taipei.
The US-China trade war would ultimately hurt consumption and world economies, if the countries to slap heavy tariffs on consumer electronics.
The Touch Taiwan show opened yesterday at the Taipei Nangang Exhibition Center and runs through tomorrow.
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