Nikkei Asia is reporting that AUO is planning to scale back production at its Singapore facility and potentially relocate some of the equipment to Taiwan as part of its increased focus on advanced MicroLED screens. According to the report, AUO and Apple view MicroLED as a way to compete with South Korean and Chinese companies dominating the OLED segment.
The reorganization of AUO’s global manufacturing footprint involves considering options for transforming the Singapore facility, including moving production equipment to Taiwan for research and development of micro-LED technologies. A final decision is expected in early 2024. The Singapore factory, which AUO acquired from Toshiba Mobile Display in 2010, could be repurposed as a regional service hub to support operations in Southeast Asia, including an upcoming display module factory in Vietnam.
While the Singapore facility helped AUO maintain display output during the pandemic-driven surge in demand for notebook computers and monitors, it has become less essential due to a market downturn that began last year. AUO aims to leverage the facility’s engineers’ experience and knowledge by positioning them as a strong backup for the company’s strategy in Southeast Asia.
AUO plans to ship its first batch of MicroLED screens in the final quarter of this year, primarily for Tag Heuer’s luxury smartwatches. The company sees this project as a priority and hopes it will attract other clients in the wearables, TV, and automotive sectors. While AUO ranks fourth among automotive display suppliers by shipment, trailing China’s BOE Technology, Tianma Microelectronics, and Japan Display, it aims to reduce its reliance on the liquid crystal display (LCD) business, with its price volatility. AUO reported significant net losses in 2022 due to the slowdown in consumer electronics demand and continued losses in the first quarter of this year. Consequently, the company is aggressively investing in MicroLED technology research and development and production to diversify its business.
What Display Daily Thinks
AUO is right. Trying to invest in OLED and competing with Korean and Chinese display giants is going to be a case of too little, too late. Any display manufacturer below the tier one suppliers is going to need to think about the old adage: get big, get niche, or get out. Niche isn’t a great option if it means downsizing, no investor wants to see that, but it will work for companies of a certain size. The thing that excites me is the thought of consolidation, and merging of pieces outside of Korea and China, to create companies that have the muscle to compete with the big boys.
Consolidation and M&A activity should pick up in a big way by the third or fourth quarter of this year. The question is whether a company like AUO, and others like it, will have the resources to restructure their businesses through acquisitions and mergers? If the company sees opportunities in automotive, for example, where LG is so dominant, it will need more than just a change in focus and technology.
