LCD display makers strive for better economies of scale

This article was written by Susan Yu and published by the Taiwan Journal on April 14, 2006. It reports that Taiwan's two largest flat-panel makers recently announced their plans to quickly expand production output, in order to match the scale of their South Korean rivals.

AU Optronics Corp., Taiwan's largest and the world's third-largest maker of thin-film-transistor liquid-crystal display (TFT-LCD) panels, is planning to acquire a local competitor. The merger is expected to boost the company's production capacity to over 19 percent of global output. This will pose a considerable threat to LG. Philips LCD Co. and Samsung Electronics Co., which are the world's No.1 and No.2 TFT-LCD panel makers, respectively. At present, LG. Philips has a market share of 22 percent, while Samsung has 20 percent.

AU Optronics Corp. was established in September 2001 as a merger of Acer Display Technology Inc. and Unipac Optoelectronics Corp. The company has been using mergers to quickly expand its production capacity and bargaining power.

In contrast, Chi Mei Optoelectronics Corp., Taiwan's second-largest TFT-LCD panel maker, chooses to expand by setting up new plants. The company plans to spend US$320 million and set up a new plant in Foshan in southern Taiwan's Guangdong Province, in order to focus on assembly of LCD TV panels. The project is expected to reduce Chi Mei's production cost significantly.

Chi Mei already has a plant in Ningbo in China's Zhejiang Province, which specializes in assembling LCD displays for office machines. This plant is expected to save US$15.4 million for Chi Mei in 2006. Together, the two plants in Foshan and Ningbo can save up to US$18.5 million per month for Chi Mei.