Taiwan's TFT-LCD Makers ADT and Unipac Merge to Assure Survival
March 21, 2001 (TAIPEI) -- Taiwan's Acer Display Technology Inc. (ADT) and Unipac Optoelectronics Corp. (Unipac) recently announced a merger aimed at cementing their survival in the current tough competitive environment.
The merger ratio is fixed at 1:1.17. As the surviving company, ADT will change its name to AU Optronics Corp. and emerge from the deal as a huge entity with a capital base of NT$29.7 billion.
ADT is part of the Acer Inc. group, and its majority stockholder is Acer Communications & Multimedia Inc. (ACM). ADT has a manufacturing base in Hsinchu and operates Fab 1 and Fab 2 thin-film transistor liquid-crystal display (TFT-LCD) production facilities. The Fab 1 facility uses mother glass substrate sized 600 x 720mm, and has an input production capacity of up to 50,000 sheets per month. The Fab 2 facility uses 680 x 880mm mother glass, with an input production capacity of 50,000 sheets per month at full operation. Current production capacity of Fab 2 is 15,000 sheets per month.
The Fab 1 and Fab 2 facilities manufacture 13.3-inch (diagonal length 34cm), 14.1-inch (diagonal length 36cm), 15-inch (diagonal length 38cm), and 17-inch (diagonal length 43cm) TFT-LCD panels. ADT's technology partner is IBM Japan Ltd. From the estimates of Daiwa Institute of Research, production in 2000 will be 1.3 million sheets, with net sales are to be NT$14.8 billion and pre-tax profits NT$830 million.
Unipac is part of Taiwan's United Microelectronics Corp. (UMC) group, and is the oldest display panel maker in Taiwan's TFT-LCD industry. It has Fab 1, Fab 2A, and Fab 3A production facilities. The Fab 1 facility produces LCD sheets from 320 x 400mm mother glass, and has an input production capacity of up to 8,000 sheets per month. The Fab 2A and Fab 3A factories use 610 x 720mm mother glass, with an input production capacity of up to 30,000 sheets per month. Unipac's technology partner is Matsushita Electric Industrial Co., Ltd. The company's specialty is small- and medium-size panels less than 10 inches (diagonal length 25cm) in size, for use in digital still cameras, all-in-one camera/recorders, car navigation systems, and handheld TVs.
Unipac manufactures and supplies small panels ranging from 1.8-inch (diagonal length 5cm) to 8.4-inch (diagonal length 21cm) in size, and large panels 13.3-inch (diagonal length 34cm), 14.1-inch (diagonal length 36cm), and 17-inch (diagonal length 43cm). It began producing large panels in 2000, and shipments for 2000 are expected to reach 640,000 sheets, with net sales estimated at NT$10.7 billion.
The merger between ADT and Unipac is mutually beneficial. ADT has the edge over Unipac in several respects: (1) ADT has production capacity and facilities for large-size panels; (2) ADT has a customer base for large-size panels; (3) ADT is allied with Acer Inc. and ACM in the Acer Group, and therefore enjoys a captive demand for panels for laptops, monitors, and mobile phones; (4) Acer and ACM each have a major manufacturing base in China -- in Guangdong province and Suzhou province, respectively -- which gives ADT the opportunity of establishing modular manufacturing bases in the vicinity to supply LCD products to Acer and ACM; and (5) ADT has research teams working on plasma display panels (PDPs), electroluminescence, and low-temperature poly-silicon TFT-LCDs among other topics. However, ADT is inferior to Unipac in engineering capabilities and its customer base for small-size panels, and both ADT and the Acer Group as a whole are suffering from cash flow problems.
For its part, Unipac brings the following strengths to the deal: (1) Small-panel design and manufacturing technology and customer base; (2) Financial backing from UMC, abundant cash flow, and outstanding human resources in the area of array manufacturing; and (3) Superiority in supplying driver LSIs within the UMC Group. However, the stumbling block for Unipac is its lack of downstream enterprises (manufacturers of laptops, monitors, or mobile phones) to provide demand, and the fact that it has no production bases in China.
The merger deal offsets the disadvantages of both companies, and strengthens their advantages. The resultant synergies and economies of scale will improve the stability of business operations and greatly increase the choices available to AU Optronics in formulating a business strategy in the future. The new company will gain immense advantage from the economies of scale, corporate presence in China, full line-up of product sizes, expanded customer base and secure source of capital funding. As things stand at present, AU Optronics is highly likely to be the survivor out of the seven leading TFT panel makers in Taiwan. It presents a huge threat to these other TFT makers, including Chi Mei Optoelectronics Corp. (CMO), HannStar Display Corp., and Quanta Display Inc., and observers predict that future moves to form cross-corporate alliances among these competitors will be even more active than previously expected.
All the same, AU Optronics will probably not be able to compete on an equal footing with the leading companies in Japan and Korea. Although ADT's and Unipac's technology partners, IBM Japan and Matsushita Electric, have technical expertise, they are not leaders in the global TFT industry, and it is doubtful whether the new company formed by this merger will have the technological clout to threaten the top Japanese and Korean makers. The real question will be whether AU Optronics can build new and deeper technology-based alliances with leading Japanese and Korean corporations, or whether it can build closer ties with Taiwanese TFT makers that are allied with those leading Japanese and Korean corporations.
Revenues in the foreseeable future will largely depend on whether the administrative and support divisions of the two companies can be amalgamated smoothly and whether costs can be kept down. There will be major benefits in areas such as materials and equipment purchasing, but both companies have low operating ratios at present, and it unlikely that the merger will have a significant impact on revenues in the short term.
Related story: Taiwan's Two TFT-LCD Leaders Merge into World's Second-Largest Maker
(Yasuo Nakane , Senior Analyst, Daiwa Institute of Research Taipei Representative Office, Special to Nikkei Microdevices) |
