Taiwan LCD equipment firms forge R&D alliance, as panel makers cut back investments

February 2, 2007 – Seven Taiwanese equipment suppliers are banding together to explore R&D of key manufacturing equipment for the $30B flat-panel display industry — even as global capital spending by top panel makers is expected to brake significantly, according to reports in the Taiwan Economic News.

The stakes are big — Taiwan’s flat-panel display production value surpassed $30 billion in 2006, with an average annual investment of $4.31 billion per local LCD panel supplier, the paper noted. And further expansion is projected with construction of 7.5G and 8G panel plants, notably by Chi Mei Optoelectronics (CMO), the island’s No.2 TFT-LCD panel maker.

CMO general plant manager Lee King-de was cited saying the company used 100% Japan- and US-made equipment for its 3.5G and 4G plants, and Korean equipment for its 5G facilities, but has begun adopting locally made equipment for panels first in rear-section LCD module assembly. Locally made equipment accounts for about 30% of CMO’s total TFT-LCD production machines in terms of volume, but only 10% of the output value, he said.

The group of suppliers — Mirle Automation Corp., Gallant Precision Machining Co. Ltd., C Sun Manufacturing Ltd., Hiwin Mikrosystem Corp., Usun Technology Co. Ltd., Mactech Corp., and E-Sun Precision Industrial Co. Ltd. — hope to narrow their trailing gap behind rivals in Japan and South Korea. Taiwan LCD equipment made up only 22% of all manufacturing equipment for large TFT-LCD panels in 2005.

While suppliers jostle for position to serve customer growth, global TFT-LCD panel suppliers are looking to cut back on their spending in the coming year. The paper pointed to DisplaySearch numbers suggesting a three-year period of declining investments starting with 8% this year, and cited “foreign institutional investors” worried the slide could be as much as 25%-30%, to the same level as 2001. Companies flush with cash may slow down their investment plans, while smaller firms could suspend investment projects altogether, the paper noted.

Samsung and LG.Philips have already cut their capital spending budgets by 40%-60% this year, noted the paper. Locally, No.1 panel producer AU Optronics Corp.’s (AUO) capital spending budget is estimated at about $2.77 billion, down about 18%, while No.3 Chungwa Picture Tubes Ltd.’s (CPT) capex of $270.8 million is down 61% from a year ago.

Both AU and CPT are seeking to downsize investment projects in the Central Taiwan Science Park Houli Base. AUO now expects to spend ~$7.8 billion for two new *G panel plants at the park, down from $12.3 billion for four new plants. Construction is now slated to start in September, about a year behind schedule.

CPT, meanwhile, has decided to only build two plants at the base instead of four (one 6G, one 7.5G), at a total cost of $5.12 billion. CPT is moving its scheduled plant complex to the Chihsing Farm site in the southern part of the Houli base, taking over a portion of land rented by AUO.

Even CMO is looking to cut back spending. The firm has delayed its 8G investment in the Kaohsiung Science Park, which is now expected to start production in 2009 at the earliest, the paper said.


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