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September 21, 2017

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AUO hopes plant in Kunshan will begin production in 2016

TAIPEI--AU Optronics Corp. (AUO), one of Taiwan's leading flat panel makers, said yesterday that it hopes its plant located in Kunshan, Jiangsu province will become operational in 2016.

An exact timeframe on when the Kunshan plant can begin operations will depend on whether the company can raise enough funds by the end of 2014 to inject necessary capital into the new plant, the company said.

The plant's production capacity in 2016 was raised after AUO decided to change it to a 6th generation production site to roll out small and medium size screens, from a 8.5 generation one, which had been previously designed to supply large-size displays.

Construction of the Kunshan plant was completed after AUO obtained a greenlight from Taiwanese authorities to set up an 8.5 generation plant in China about three years ago. But the new plant needs to be equipped with production facilities before it can churn out screens.

Operations in the new plant also could be affected by the global flat screen supply glut, in particular in large-size screens.

According to Taipei-based market research institution WitsView, shipments of large-sized panels for January are expected to fall 10-11 percent from December, when shipments fell 4 percent from November to 73.71 million units, due to weak demand.

Large-size screens, in particular TV panels, are the largest source of sales for AUO and the supply glut has imposed an impact on the company's bottom line, market analysts said. In the third quarter of last year, TV panels accounted for 44 percent of AUO's total sales, down 48 percent recorded in the second quarter.

While the flat panel market is awash in large-size displays, screen suppliers, including AUO, have witnessed a rising demand for small and medium size screens, convincing the company to transform the Kunshan plant into a 6th generation one.

AUO said it will take advantage of strong demand for smartphones and tablet computers in the global market by providing high-end small and medium size displays for the use in mobile devices.

AUO has scheduled an investor conference for Jan. 27 to release its fourth quarter results and issue guidance for the first quarter. Investors expect the company will give more details about its plan on the Kunshan plant at the meeting.

The plant is a joint project between AUO and the Kunshan city government, with the Taiwanese company holding a 49 percent stake.

It comes at a time when AUO's Chinese counterparts are gearing up to raise production from their 8.5 generation plants.

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