Back in 2004, when selling CD-ROMs was still a lucrative business, BenQ Materials Corp (明基材料) thought it was time to get out.
In the years that followed, the technology became less mainstream, overtaken by everything from flash drives to online downloads.
Now, the Taiwanese electronics parts maker is doing it again. This time, it is cutting back on a different cash cow: a component that it produces for liquid crystal displays. And it is getting into parts for electric-vehicle batteries.
While BenQ Materials is a small company, with a market value of just US$199 million, and some might argue that getting out of CD-ROMs in 2004 was not that prescient, its move is emblematic of the difficulties facing the industry.
LCD panels have been under pressure from the emergence of newer technologies, such as OLED, with Apple Inc, for example, adopting those screens for some of its smartphones.
At the same time, a glut of Chinese supply is causing prices to slump as LCDs become commoditized.
“Change is painful,” BenQ Materials chairman and chief executive officer Z.C. Chen (陳健志) said in an interview.
However, “I don’t see much room for this business to grow,” he added.
In 2004, Chen and other executives decided to risk severing ties with Japanese giant Sony Corp, to which it supplied CD-ROMs. At the time, the discs were a key part of BenQ Materials’ business.
However, the company decided to become a maker of polarizer films for LCDs for Taiwanese electronics maker AU Optronics Corp (友達光電).
The firm discontinued CD-ROM production entirely in 2011.
BenQ Materials now relies on the films, which are crucial for controlling light transmission in LCD panels, for 90 percent of its revenue.
It plans to cut this initially to 70 percent and might go lower over time, Chen said.
In a shift in focus, the company is hoping to get into the electric-vehicle supply chain.
The company has approached a major Japanese auto parts maker about supplying components for rechargeable batteries, Chen said.
Chen’s move away from LCD parts comes as slumping prices deal a blow to the industry.
Prices of 55-inch ultra-high-definition LCD screens, for example, fell 4.8 percent as of July 5 compared with the previous month, accelerating from an average 2 percent decline in the previous six months, according to data compiled by WitsView, a research unit of TrendForce Corp (集邦科技).
That comes as Chinese companies pump billions of US dollars into building factories that churn out large LCD panels for TVs.
BenQ Materials, which is listed in Taipei, has also felt some effects. The company’s stock is down 5.25 percent this year after surging 34 percent the year before.
It is perhaps not that surprising that the company is choosing to act again.
"As long as there’s no technology advance, then the price drop will be very severe," Chen said, referring to both LCDs and its polarizer films. "We have to keep moving to other areas."
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