Interview: HannStar's big new plan for a merger-free future

Taipei Times: Why hasn't HannStar seen mergers as a quick fix to the heavy losses it suffered in the past nine quarters due to oversupply?

David Chou (周定輝): Mergers are complicated. Instead, we are focusing on improving our financial situation. I'm proud to say that the results have been satisfactory.

HannStar has already dealt with its most important problems in terms of financial status. The company will be able to fully reverse its past [unimpressive] operations, provided we make the right decisions about product strategies and the size of a new cost-effective plant. I don't think it is appropriate to enter any merger talks with any company at the moment, as mergers may cause more uncertainties.

HannStar has reduced its debt ratio to around 39 percent and we now hope to drive that figure down further to 33 percent by the end of the year and to more than 10 percent next year by paying back more debts. Our debt ratio is much lower than our bigger rivals. [AU Optronics Corp (友達光電), for example, was posting 64.2 percent in net debt to equity ratio as of last quarter].

While getting rid of its financial burden, HannStar saw a good chance to pick up growth momentum and reverse its past operational trough. Now we use most of our capacity in making 19-inch, 17-inch-widescreen and 28-inch-widescreen panels, for which HannStar has the lowest cost compared to its competitors.

Besides, we are also carefully evaluating building a cost-effective next-generation factory [to broaden our product portfolio. Now the biggest screen made by HannStar is the 28-inch panel used in monitors that are equipped with TV turners.]

TT: HannStar has been talking about cooperation with other Taiwanese liquid-crystal-display (LCD) panel makers to minimize the impact of price declines on overcapacity. Can you elaborate on that?

Chou: We made substantial progress by cooperating with Chunghwa Picture Tubes Ltd (中華映管) in assembling panels in China. To be specific, we swap capacities to cater to our needs. HannStar swapped 19-inch modules for Chunghwa Picture's 17-inch modules, which HannStar can assemble to make slim screens for our brand-name Hanns G (瀚視奇), computer monitors.

TT: Do you worry about Innolux Display Corp (群創光電)? Will it pose a threat to HannStar? [Innolux is the flat panel and LCD monitor manufacturing arm of Taiwan's biggest electronics component maker, Hon Hai Precision Industry Co (鴻海精密).]

Chou: Not in the least. I think HannStar will benefit from Innolux's growth, as Innolux is one of our customers.

Innolux buys 17-inch panels from HannStar so HannStar can grow along with Innolux's expansion as the company will not change its policy of sourcing half of the panels it needs from outside suppliers and half made in its factories.

HannStar is also in talks with Innolux to supply 19-inch panels. As such, we only directly compete with Innolux in the area of 7-inch flat panels.

TT: HannStar is halfway into designing a next-generation plant in Tainan. Does HannStar have any plans to resume construction anytime soon?

Chou: Hopefully, we will restart the project next year. But that will be in accordance with the growth in our own-brand monitors. HannStar makes the equivalent of 14 million 19-inch panels a year at its fifth generation (5G) plant; more than a third are for our own monitors.