Taiwan's smaller liquid-crystal-display (LCD) panel-makers would be more likely to seek mergers this year as a result of intensifying competition from new market entrants and the difficulties associated with improving profitability by tapping into the fast-growing television market, a foreign securities house said in a recent report.
However, minor players which enjoy financial support from their parent companies would remain reluctant to consolidate and might pin their hopes on booming LCD-TV demand, despite prolonged losses, according to the report.
"We believe there could be greater impetus for potential mergers among the second-tier players in 2006," Frank Lee (
The second-tier players have been struggling to move into the LCD-TV market, and would continue to suffer ongoing earnings erosion in the manufacturing of computer panels, Lee said.
Deutsche Securities said that LCD-TVs are a major growth driver for panel-makers and forecast that slim-screen TV sales would more than double to around 4.5 million sets this year, from 1.9 million last year.
However, HannStar Display Corp (瀚宇彩晶) said it was in no hurry to pour big money into building a next-generation plant for making LCD-TV panels.
Lee expected second-tier players to face increasing competition from newcomers such as Innolux Display Inc (群創光電), Chinese BOE Technology Group Co (京東方) and SVA Group Co (上海廣電).
This would provide fresh impetus for smaller panel-makers to reconsider consolidations, he said.
"The most likely outcome would be a merger between Quanta Display Inc (
Chungwha Picture's major shareholder, Tatung Co (大同), is known to be planning to sell its 30-percent stake and Quanta Display was a potential buyer, he said, citing complementary product portfolios and similar company cultures.
But, Lee said he would also not rule out the possibility of Hon Hai group (
Chunghwa Picture and Quanta Display denied the merger speculation, but said they kept an open mind about the potential for future cooperation.
Lee said his top picks were AU Optronics Corp (
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