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AUO and Innolux move closer to merger

TAIPEI, Taiwan -- A ranking official in the government on Monday confirmed that Hon Hai Group expressed its intention to merge subsidiary panel maker Innolux Corporation with its closest rival AU Optronics Corp (AUO), according to local reports.

Innolux shares yesterday lagged behind the broader market, closing down 1.83 percent at NT$10.75, while AUO braved the downward pressure to surge 3.85 percent at NT$10.25 at the end of yesterday's session.

Minister of Economic Affairs (MOEA) Chang Chia-juch (張家祝) revealed to local media last weekend that Hon Hai Group (鴻海集團) Chairman Terry Gou (郭台銘) recently approached him about the merger between Innolux (群創光電) and AUO (友達光電).

According to a United Evening News report yesterday, both AUO and Innolux hold an open attitude toward Gou's initiative.

Market analysts indicated that despite the government's willingness to lend a helping hand, AUO and Innolux have to talk their bank consortium into giving their assent before the merger can take place.

Innolux and AUO are Taiwan's top two producers of thin film transistor-liquid crystal display (TFT-LCD) panels. The overall outstanding loans the banks made to AUO and Innolux currently reaches NT$400 billion, 75 percent of which was financed by state-invested banks.

Both AUO and Innolux recently announced the receipt of new big-ticket orders, according to United Daily News.

AUO Expected to Launch Itself out of Losses: Sources

AUO, the pioneer in the promotion of curved LCD TV panels, began shipping 65-inch panels to Japan's Sony and China's Changhong in 2013. The company recently sealed blockbuster orders for curved panels with Samsung, the world's largest TV vendor, as well as from non-branded home-appliance makers in China, keeping its production lines fully occupied.

With its improved yield rate and growing ratio of higher unit-price products, including 4K2K, or ultra-high definition, panels in its shipments. Industry sources said that AUO is expected to be profitable in the first quarter of this year, confounding predictions by foreign institutional investors that its operations would be in the red.

Innolux received orders for 50-inch 4K2K TV panels from Samsung and 65- and 75-inch orders from Sony. Innolux earlier said that this will help its 4K2K TV panel shipments grow by a factor of five.

Samsung unveiled a new series of curved TVs at CES 2014, implying an intention to switch from organic light-emitting diodes (OLEDs) to curved LCDs. An NPD DisplaySearch analyst has pointed out that LCD TVs have achieved a penetration rate of 96 percent, and that OLED TVs are not expected to enjoy any clear increase over next 2-3 years. So 4K2K will be the market mainstream in the coming two years.

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