AU Optronics to build China LCD plant

Taiwan’s AU Optronics has won the first-ever government clearance to set up an LCD factory in China, a company representative said, in a key boost to the long-term competitiveness of Taiwan’s tech sector.

The island’s Ministry of Economic Affairs gave AU the go-ahead on Friday – after nine months of deliberation – to invest $3bn on a factory near Shanghai that will produce 7.5-generation liquid crystal displays, said company publicity manager Freda Lee.

“We are the first Taiwanese company that has been allowed the go to mainland China to set up this kind of LCD factory,” Ms Lee said in a telephone interview. “And now demand from Chinese television makers is on the rise.”

AU supplies LCDs to Dell, Sony and Hewlett-Packard. It is in a race with other Asian LCD makers as demand for the parts increases among Chinese hardware makers. AU’s South Korean rivals LG Display and Samsung Electronics won approval from China last month to set up plants.

“The significance is that LG and Samsung have their permits and Taiwan doesn’t want to be left behind,” said Sebastian Ho, a sector analyst with Yuanta Investment Consulting in Taipei. “If this field wants to see double-digit growth, especially in supplying television makers, the future is in China.”

AU’s China factory will open in 2012. It will not set production targets or determine the factory staff size until negotiating permits with Chinese officials, Ms Lee said.

Taiwan began allowing applications for LCD factories in China only from the start of the year after overcoming fears about allowing transferring technology to a political rival with a reputation for copying trade secrets from overseas.

AU’s cross-town rival Chimei Innolux has not applied for a similar factory in China but is getting ready to put in a bid, analysts believe.

In exchange for the go-ahead, Taiwan’s economic ministry asked AU to set up four new plants at home. It will spend T$400bn ($13.2bn) on two solar plants and two 11th generation LCD plants between 2012 and 2022, Ms Lee said.

Taiwan is aggressively trying to develop solar energy as an economic pillar. Officials also want big companies to expand locally to keep jobs onshore.

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