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April 25, 2006 12:33 pm

Taiwan’s Chi Mei rules out acquisitions

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Chi Mei Optoelectronics, Taiwan’s second-largest flat panel maker, has ruled out acquisitions, damping hopes that a recently announced merger between two of its domestic peers could trigger more consolidation in the liquid crystal display industry.

Ho Jau-yang, president, said CMO would concentrate on expanding the most advanced production capacity to meet rising demand for large TV panels, but none of the available acquisition targets in the sector has such assets.

“Among those who are willing to be acquired, there is no one with a 7.5 generation fab or above. Therefore we have no choice but go it alone,” said Mr Ho.

Earlier this month AU Optronics, CMO’s larger rival, said that it would acquire Quanta Display, a smaller Taiwanese flat panel maker.

“The deal leaves CMO between a rock and a hard place,” said one analyst.

Jeffrey Su, an analyst at Merrill Lynch, said in a recent report that the scale gap between AU Optronics and CMO would widen if CMO did nothing. But he added that “if CMO acquires someone it will be a less attractive tier two panel maker” with a heavier burden than Quanta Display.

Apart from the two leading players and Quanta Display, Chunghwa Picture Tubes, Hannstar and Innolux are Taiwan’s remaining second-tier panel makers. Hannstar and Chunghwa Picture Tubes are both considered to be too weak to survive on their own.

Mr Ho said on Tuesday that CMO expected to spend T$100bn for advanced capacity this year and in 2007. CMO has started to build its first eighth-generation fabrication plant and plans to double capacity by the end of next year of a 7.5 generation plant which is scheduled to start mass production in early 2007.

Mr Ho said that with demand growing for ever-larger flat screen TV sets, CMO is keen to have the required capacity ready in time. He said that 42-inch sets, which are supplied by 7.5 generation panel plants, would very soon become the “mainstream in the living rooms”, and the market for sizes of 50 inches and above would take off by 2008.

CMO on Tuesday reported a T$5.5bn net profit for the first quarter, reversing a loss in the same period last year.

But the company gave a more cautious outlook for the current quarter than other panel makers. It said despite a slight sequential increase in panel shipments, a further 5 per cent drop in average selling prices would cause profit margins to slide.

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