Taiwan's LCD makers step up China production
By Faith Hung
EBN
(05/28/02 14:04 p.m. EST)
HSINCHU, Taiwan -- Two of Taiwan's biggest flat panel makers are stepping up their efforts in China to take advantage of the lower costs and increasing demand on the mainland.
AU Optronics Inc. said that it's expecting monthly capacity at a new facility in the southeastern city of Suzhou to rise to 500,000 to 600,000 TFT-LCD modules by the end of this year from a trial production currently.
Chunghwa Picture Tubes Ltd. is planning to move to phase two after beginning a ramp-up production in its plant near Shanghai. Capacity is estimated to grow to 200,000 modules per month at the yearend, compared with about 30,000 now, according to H. K. Chung, a vice president of Taoyuan-based Chunghwa.
The moves by AU and Chunghwa show that OEMs are increasingly shifting their production to China. ”Dell Computer, Compaq Computer, Benq and Compal Electronics are asking us to raise production in the Chinese mainland,” said an official at AU, Hsinchu, Taiwan, who asked not to be named. “China is so big that it pretty much has drawn most of our customers and suppliers there. We get to save a lot of money in logistics because we can do sampling and shipment right in the same country.”
Expanding in China could translate into cost advantages for Taiwan's TFT-LCD companies, allowing them to boost their strength against South Korea, their largest rival, some analysts said. For the full year of 2002, revenues generated by the island would double to $6.3 billion from a year earlier, according to forecast from Market Intelligence Center, Taipei. In the March quarter alone, TFT-LCD shipment surged 188.3% to $1.4 billion from the year-ago period, said the research agency. As part of an expansion effort, AU recently collected $579 million from an overseas stock sale by selling 50 million American depository shares at $11.57 per unit on the New York Stock Exchange. The proceeds will be used to purchase manufacturing equipment for its latest generation-five fab.
The completion of the stock sale suggests a strong outlook for the flat panel industry, according to the company. “AU is planning to add new capacity in the third quarter, and sales over the period would rise more than 10% from the second quarter,” company chairman K. Y. Lee said recently. “Demand for TFT-LCD is still surpassing supply, preventing product prices from declining.”
Still, there're growing concerns among the industry that flat panel prices could soften following price surges that started in the first quarter of this year.
LG Philips will soon enter mass production of its fifth-generation panels, while Samsung Electronics, and Taiwan's Chi-Mei Optronics, Chunghwa, Quanta Display Inc. and Hannstar all have plans to build similar fabs, analysts said.
“LG and Samsung are the biggest players in the world. They might cut prices to maintain their market shares,” said Sean Wu, an analyst at MIC.
Panel companies suffered losses in 2001 as weak demand and an excessive supply forced them to cut prices deep, analysts said. AU, for example, lost $195.6 million last year on sales of $1.1 billion.
Each ADS represents 10 common shares traded on the Taiwan Stock Exchange, AU said. |
