Analysis: AUO making changes as part of China strategy
Central News Agency
2014-01-19 10:00 PM
Taipei, Jan. 19 (CNA) Taiwan's AU Optronics Corp. (AUO), the world's fourth-biggest LCD maker, is taking the necessary step of focusing on higher-end production in China rather than competing in the low-cost market segment, according to local dealers. AUO said Saturday that it hopes its plant in Kunshan, Jiangsu Province will become operational in 2016. The company decided to change the plant from an 8.5th generation to a 6th generation production site, to roll out small- and medium-sized screens instead of large-sized displays as previously planned. Construction of the Kunshan plant was completed after AUO obtained permission from Taiwanese authorities to set up an 8.5th generation plant in China about three years ago. But the new plant has to be equipped with the appropriate facilities to produce high-end flat panels for smartphones and tablets using AUO's low-temperature polycrystalline silicon (LTPS) technology. Dealers said the change at the Kunshan plant represents a strategic move by the Hsinchu-based company to target the mid-range and high-end mobile markets in China. Another key reason for delaying operations at the Kunshan plant is that AUO aimed to cut back its capital expenditure in the hope of achieving a faster turnaround, and the efforts paid off in the second quarter of 2013 when the company snapped a 10-quarter losing streak and returned to profitability, dealers said. The LTPS technology, with its advantage of high electronics mobility, can be easily applied to high-end panels featuring high-resolution of 330 pixels per inch (ppi) and above, as well as ultra-narrow bezel. It has been adopted in Inc.'s Kindle Fire HD/HDX and Google Inc.'s Nexus 7 tablets. Although the market is crowded with low-priced tablets, brands with economic-scale production such as Apple Inc., Samsung Electronics Co., Google and Amazon must launch a resolution of 350ppi and above in order to improve their competitiveness and brand image. This will present a new opportunity for the next LTPS technology, which will drive a continuous increase in the penetration rate of tablet panel shipments from only 2 percent in 2013, according to forecasts by Taipei-based market intelligence firm WitsView. "As we observe the fluctuations among plants of all generations, it is clear that the 5th generation has a declining percentage of large-sized panel production," WitsView Research Manager Boyce Fan said in a report published last month. "After an 11.6 percent annual drop in 2013, mid-and small-sized panels are rising on higher demand and generating higher profits," he wrote. WitsView said that eight 8.5th generation plants will start mass production in China by 2015, and the country will gain a growing proportion of 5th generation-and-above capacity, rising from 13.8 percent in 2013 to 24.5 percent, close to Taiwan's estimated 28.1 percent. With its lifting of import tariffs on panels, China will secure a perfect spot in the global panel supply chain and inevitably outpace Taiwan, while catching up with South Korea, WitsView said. That will substantially affect Taiwan's entire supply chain in the TFT-LCD industry, the research company concluded. AUO shares closed up 0.11 percent at NT$9.37 (US$0.31) Friday in Taipei trading. (By Pan Chi-i and Jeffrey Wu)
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