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June 9, 2006 1:31 am

TPO expects T$1bn profit from recovery

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TPO, a leading mobile display maker formed through the merger of Philips’ mobile display unit and Taiwanese mobile display maker Toppoly, expects to make T$1bn (US$31m) profit on revenues of $1.5bn this year.

Efficiency gains arising from the increase in scale of the merged entity will help turn the business round after six years of losses at Toppoly and losses last year at the Philips unit, Ray Chen, TPO’s chairman, told the Financial Times.

In the first interview since Monday’s merger, Mr Chen said TPO had already surpassed Sanyo Epson as the world’s second-largest small-size display maker and was challenging market leader Samsung SDI. “Our monthly output has exceeded 10m units.”

The company makes small-size flat panel displays used in mobile phones,
digital cameras and other specialist displays. Prior to the merger, Philips was the world’s fourth-largest mobile display maker, and Toppoly ranked 12th.

Compal Electronics, the world’s second-largest notebook manufacturer and one of Toppoly’s founders, owns 25 per cent of TPO, and Philips is its second-largest shareholder with a 17.5 per cent stake. Mr Chen is also president of Compal.

“Toppoly turned profitable in March and April, and TPO will be profitable for the rest of the year,” said Mr Chen. He added that the turnround was being achieved by closing Philips’ plant in Shenzhen, southern China, and combining the company’s China operations in Shanghai. The company was also benefiting from improved pricing power in materials purchasing and a better customer and product mix.

“We can do better in manufacturing efficiency because that is a capability we get from our [Compal] group background,” said Mr Chen. “On the customer and product side, we now have a much healthier, more diversified portfolio.”

Before the merger, Toppoly shipped up to 60 per cent of its displays to Compal Communications, the group’s mobile phone contract manufacturer.

This percentage has now dropped to under 30 per cent as the Philips unit has brought in top-tier handset customers.

He added that the company aimed to improve profitability far beyond this year’s expected levels, in particular, through increasing the revenue contribution from higher-margin products used in the automotive and avionics industries.

These two applications accounted for only 6 per cent of TPO’s revenue, while mobile phone displays made up more than 70 per cent.

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