The government is close to raising the ceiling of the Chinese investment cap in local panel manufacturers to as high as a 50 percent share in an effort to help money-losing local LCD panel makers to get new funding.
Currently, Chinese companies are allowed to own only a 10 percent share in local flat-panel suppliers. The relaxation will pave the way for future capital investments from China in Taiwan’s panel companies, which are under mounting pressure to catch up with their South Korean rivals in producing new high-resolution displays and are losing money because of expensive research and development.
Shares of the nation’s two biggest LCD panel makers, Chimei Innolux Corp (奇美電子) and AU Optronics Corp (友達光電), yesterday rallied more than 1.5 percent on the news.
On Thursday, the Cabinet passed the final-round review of the proposals to relax Chinese investments in Taiwan’s major industries that include the LCD, LED and semiconductor sectors. To get the permission, any investment projects from China will need a case-by-case government review.
The new rules, set to take effect by the end of this month, are still awaiting final approval by the Cabinet.
“Taiwanese LCD companies are burning cash amid an industrial slump. China’s funding will quench local companies’ thirst for new funding, as they need fresh capital to help step up their development of new AMOLED technology,” Locke Chang (張小彪), a senior LCD analyst with market researcher TrendForce Corp (集邦科技), said by telephone.
In exchange, local firms’ Chinese strategic partners would have access to more advanced technologies, Chang said.
“But that will be a short-term benefit for local firms. After all, Taiwanese companies are competing with their Chinese peers,” Chang said.
Chunghwa Picture Tubes Ltd (中華映管), the nation’s No. 3 LCD panel maker, welcomed the new investment rules, chairman Lin Wei-shan (林蔚山) told local cable TV provider Unique Broadcasting yesterday.
“In the past, the shareholding [permitted to be held by Chinese firms] was way too low,” Lin said. “Now, we are in talks with interested parties.”
No Chinese companies have applied to buy a share of local LCD companies since the government relaxed the restriction on Chinese investors last year for the first time, because of the investment cap.
Separately, Chimei Innolux’s board yesterday named CEO Tuan Hsing-chien (段行建) as the company’s new chairman, ending a three-and-half-month-long search for a successor to Frank Liao (廖錦祥), who quit on Dec. 2 because of health problems.
The appointment came after a request by Chimei Innolux’s creditors to roll over syndicated loans of NT$201.61 billion (US$6.83 billion).
Tuan will double as the company’s CEO, company spokesman Eddie Chen (陳彥松) said by telephone.
Meanwhile, Chimei Innolux was arranging a share offering, which was part of the agreement the company reached with creditor banks, Chen said. He declined to reveal the size of the fund-raising project.
The Chinese-language newspaper Commercial Times reported last month that Chimei Innolux planned to raise NT$50 billion through selling new shares to Hon Hai Technology Group (鴻海科技集團), which is a major shareholder in Innolux Display Corp (群創光電).
Innolux acquired Chimei Optoelectronics Corp (奇美電子) and TPO Displays Corporation (統寶光電) in 2010, creating Chimei Innolux.
Meanwhile, local panel maker HannStar Display Corp (瀚宇彩晶) said its board approved a plan to halve its capital shares to 2.93 billion shares. The company planned to sell a further 500 million common shares in search of strategic partners to enhance its technologies or component supply.
The board also elected Teresa Ma (馬維欣) as the company’s new chairman, to replace Chiao Yu-chi (焦佑麒).
The board also gave the go-ahead to halve the company's capital shares.
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