Flat-panel display makers AUO Corp (友達) and Innolux Corp (群創) yesterday said that about 12 to 20 percent of their display business is at risk of potential US tariffs and that they would relocate production or shipment destinations to mitigate the levies’ effects.
US tariffs would have a direct impact of US$200 million on AUO’s revenue, company chairman Paul Peng (彭雙浪) told reporters on the sidelines of the Touch Taiwan trade show in Taipei yesterday.
That would make up about 12 percent of the company’s overall revenue.
Photo: Ann Wang, Reuters
To cope with the tariff uncertainty, AUO plans to allocate its production to manufacturing facilities in countries subject to lower US “reciprocal” tariffs, leveraging its global manufacturing footprint, Peng said.
The company has added new manufacturing sites in India, Europe and Mexico following the acquisition of BHTC GmbH, a German cockpit operation system supplier, he said.
The company would not consider building a front-end display manufacturing facility in the US, due to expensive labor costs and the lack of a comprehensive display supply chain in the country, he said.
Photo: Chen Mei-ying, Taipei Times
Innolux also said it had no plans to build a manufacturing site in the US.
As a major vehicle and TV display supplier to tier-one customers, Innolux has a bigger US exposure than other display and component suppliers, chief executive officer Jim Hung (洪進揚) told a news conference in Taipei.
The company ships vehicle displays directly to customers in the US and Europe, with direct exposures of up to 8 to 10 percent, and as TV brands are among its tier-one customers, it has to directly ship TV displays to the US, Hung said.
Photo: CNA
Indirect exposures to the US accounted for about 10 to 15 percent, he said.
Like most component suppliers, Innolux also ships its displays to electronic assemblers’ factories in China, Vietnam, Thailand and other regions, he said.
In the face of rising uncertainty, Innolux has activated a stringent supply chain management mechanism as it did during the COVID-19 pandemic, Hung said.
The aim is to ensure an optimal level of component inventory as customers are scrambling to stock up on as many goods as possible at their hubs during the 90-day tariff pause announced last week by US President Donald Trump, he said.
With the lasting tariff challenges and geopolitical risks, Innolux would be more “selective in terms of manufacturing sites and partners,” compared with its strategies during the pandemic, he said.
The company is considering shifting more TV panels to TV makers in Mexico from China, given that Mexico is subject to a significantly lower US import duty than China, he said.
AUO and Innolux reported new rush orders this quarter as customers strive to avoid US tariffs.
Hung said second-quarter revenue would outgrow Innolux’s original forecast, but he expects a weaker revenue performance in the third quarter.
The US’ fickle tariff policy has upended the display industry’s seasonal patterns, Peng said, adding that AUO’s revenue forecast in February is no longer suitable.
At that time, AUO had predicted revenue to grow gradually each quarter, he said.
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