Chimei aims to build advanced China plant

The company has set up a task force and is considering a tie-up with a Chinese television maker for its LCD venture in the country, Chairman and Chief Executive Officer Tuan Hsing-chian said yesterday at the company's headquarters in Miaoli, Taiwan. He was speaking after the completion of the merger of Innolux Display Corp. and Chi Mei Optoelectronics Corp.

Taiwan's government on Feb. 10 announced the lifting of a ban on local companies building LCD factories in China as long as manufacturers invest more on the island and keep their best technology at home. Innolux last November announced its merger with rival Chi Mei in a NT$172 billion transaction a month after agreeing to acquire flat-screen monitor assembler TPO Displays Corp.

“It will take some time to have a 7.5G, 8.5G plant in China,” because although Chi Mei has advanced plants in Taiwan, Innolux has none and the consolidation of the two companies still has to be completed, Tuan said.

Chimei Innolux plans capital spending of about NT$60 billion in 2010, of which NT$20 billion will be for a so-called 8.5 generation plant in Taiwan, Tuan said. Later generations of LCD factories produce bigger panels, suitable for larger TVs, with an 8.5-generation plant making sheets roughly the size of a pool table.

The enlarged company overtakes AU Optronics Corp. as the country's biggest LCD maker, challenging global leaders Samsung Electronics Co. and LG Display Co. in the US$88 billion market for TV and computer displays. It will probably have sales of NT$40 billion to NT$50 billion a month, Tuan said. Innolux had monthly sales of as much as NT$14 billion in January and February, he said.

Chimei Innolux fell 1 percent to close at NT$51.10 in Taipei trading before the comments. The island's benchmark Taiex index added 0.5 percent.

The combination of Innolux and Chi Mei will help lower the company's debt to equity ratio, spokesman Eddie Chen said, without elaborating. The benefits of the consolidation will show in about three months, Tuan said.

AU said this week it submitted an application to Taiwan's Ministry of Economic Affairs to build its first panel factory in China, becoming the first Taiwanese company to apply for permission to build an advanced display plant in China.

AU, which supplies panels used in Sony Corp. and Sharp Corp. televisions, has asked the ministry's Investment Commission for permission to build a 7.5-generation facility in Kunshan, Jiangsu with expected total investment of US$3 billion, it said on March 15.

South Korea's Samsung and LG Display received permission from their government in December to set up factories in China. Samsung's plant will use 7.5 generation technology while LGD plans to make an 8-generation facility.

AU currently operates an 8.5-generation factory in Taichung, central Taiwan.

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