AU Optronics (AUO) and Innolux have dismissed further rumours that the two companies are considering merging, citing differences in market strategy, technology, patents and management. The two companies were reported to have been considering a merger at various points during 2014, in a move which appeared to have the backing of Taiwan’s Ministry of Economic Affairs, which was in favour of consolidation in the country’s flat panel market.
AUO’s chairman, Paul Peng, was quoted as saying that the company is looking at more smart investments and niche markets in order to remain competitive. Innolux’s chairman, Tuan Hsing-chien, further commented that both companies’ technologies and supply chains are too similar for both firms to benefit.
Meanwhile, shareholders of troubled rival panel maker Chunghwa Picture Tubes (CPT) are reported to be in favour of CPT merging with Innolux, in an effort to remain profitable. Shareholders believe that a tie-up between the two firms would benefit CPT by giving it access to Foxconn Electronics’ supply chain. Foxconn currently owns a stake in CPT.
Both CPT and Hannstar Display face major uncertainties if there is consolidation in Taiwan’s panel industry, though all four of the major panel makers face increased competition from China’s manufacturers.
Analyst Comment
I have been saying for many years that consolidation among major players rarely makes a lot of sense in LCDs. Although you might gain a little bit of scale and make some cost savings, there is always a loss for a while because of the reorganisation, and the benefit of combining is only likely to come out if there is some complementary set of skills/assets (i.e. one company has money, the other technology or one has capacity, one has a vertical customer). Simply bringing together similar fabs with similar business models under one management is unlikely to be beneficial.
In our experience, too, AUO and Innolux have very different cultures. It took a long time for Foxconn and CMO to bring cultures together to create Innolux. (BR)
