LCD companies Chi Mei and Innolux announce a merger

Innolux, a subidiary of Hon Hai Precision Industry — the world's biggest electronics products manufacturer — will take over CMO, the second largest LCD panel maker in Taiwan. Terry Guo, who heads the Hon Hai group (which is better known as Foxconn in other parts of the world), said it was a quick decision with details of the merger deal having yet to be set.

Shi Wen-long, founder of the Chi Mei group, said CMO had also been in merger talks with Taiwan's top LCD panel maker AU Optronics (AUO), but his company has decided on one that “knows better how to make more money.”

According to the announcement, the deal will involve a stock-swap between the two companies, with 2.05 CMO shares exchanging for one Innolux unit. Innolux will be the surviving company although it will keep the name “Chi Mei Optoelectronics.”

Innolux last month already announced another takeover of TPO Display, a Taiwan-based LCD specialist that makes smaller-size panels for screens in such devices as cell phones and digital cameras.

Guo, whose Foxconn makes many products for Apple, said it may not be easy to surpass Korea's Samsung Electronics as the world's number one LCD panel maker, but the Innolux-CMO merger will become Taiwan's top player in the near term. Research firm DisplaySearch said Innolux is expected to become Taiwan's number one and number three worldwide after taking over Innolux and TPO. It will also pose a strong challenge to second-place LG Display of Korea, it added. CMO lost huge sums of money in the first two quarters of 2009 amid a global economic downturn. Rumors started circulating earlier this year that CMO, trying to ease its financial pressures, was looking to sell the entire company or some of its LCD panel manufacturing facilities. On Thursday, media reports indicated that CMO had renewed merger talks with AUO and Innolux. CMO Chairman Ching-siang Liao said his company and Innolux had been in talks for only a short time, but the decision was made very quickly at the dinner table on Thursday night.

LCD panels are used to make screens for devices ranging from cell phones, notebook PCs to TVs. Taiwan is currently the second largest supplier of LCD panels worldwide, next to South Korea.

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