The synergies to be gained from a collaboration between mainland China and Taiwan are so formidable that the South Korean media has dubbed the partnership “Chaiwan,” and called for the country’s technological industries to be prepared for the threat it poses. The thin-film-transistor liquid crystal display panels (TFT-LCD) sector is one area where the South Koreans are especially feeling the heat.
Such worry is not without cause. According to the South Korea-based market intelligence firm Displaybank, for the first quarter of 2009, Taiwan’s Chi Mei Optoelectronics Corp. supplied 41 percent of panels employed by the mainland’s LCD TV producers, followed by South Korea’s LG Display Co. Ltd. and Samsung Electronics Co. Ltd. at 20 percent and 18 percent, respectively. AU Optronics Corp., Taiwan’s leading panel maker, ranked fourth with a 12-percent share.
The increasing inter-dependence of Taiwan’s panel producers and the mainland’s consumer electronics manufacturers has raised a heated debate over an important issue: should the government of Taiwan allow panel makers to set up advanced fabrication facilities on the mainland?
CMO Vice Chairman Wu Biing-seng urged the government to lift the ban that currently prohibits Taiwanese firms producing large-size panels to set up facilities on the mainland for the first two stages of production, namely the array stage and the cell stage. Under current law, local companies can only establish module assembly lines on the mainland, and they all have such operations there.
“Taiwan’s TFT-LCD industry has reached an important watershed moment,” Wu said to the local press June 10 at Display Taiwan, a major flat panel display exposition. The mainland will become the world’s largest market for LCD TVs within the next two years, Wu pointed out. He called on the government to change its policy as soon as possible to capitalize on the opportunity, adding that delaying the decision is tantamount to pronouncing the demise of the country’s TFT-LCD businesses.
AUO declined to comment on the issue. Hsiao Ya-wen, director of corporate communications at the company, stressed that while AUO holds a positive stance toward forming partnerships with the mainland, it will follow government regulations.
Wu noted that at a time when major rivals in South Korea and Japan are aggressively looking for ways to team up with the mainlanders, Taiwan should not be left behind in the race. “The best policy will be to allow panel producers to set up 8.5th generation plants on the mainland,” he said.
Employing glass substrates measuring 2200 mm by 2500 mm to manufacture panels, these so-called 8.5G plants represent the most advanced production process in the industry, and are ideal for making panels for 32-inch LCD TVs, the most popular model on the mainland. AUO has one 8.5G fab in Taiwan that will start its pilot run this month, with another under construction. CMO is also building one such plant. The South Koreans have three plants, all of which mass produce panels.
According to K.Y. Lee, chairman of AUO, TVs have become the most important application for large-size panels and contribute to over half of panel makers’ revenues. The number is expected to go up to 70 percent within three years.
Being a laggard in the game, the mainlanders are still in the 5G (1100 mm by 1300 mm) process. There are four such plants on the mainland, including Shanghai SVA NEC Liquid Crystal Display Co. Ltd., a joint venture between Shanghai-based SVA (Group) Co. Ltd. and Japan’s NEC Corp., Beijing-based BOE Co. Ltd., which acquired its technology from South Korea’s Hydis Technologies Co. Ltd., Kunshan-based Infovision Optoelectronics Co. Ltd. and Shenzhen-based Shenchao (Shenzhen) Optoelectronics Co. Ltd. SVA is currently under custody of the Shanghai government after its LCD operations suffered huge losses in 2008.
In order to prepare for the next round of competition, BOE is building a 6G fab, while Infovision has announced plans to build the mainland’s first 7.5G plant. IRICO Group Electronics Co Ltd., a newcomer in the game, is building a 6G plant. SVA NEC was reported to be studying the possibility of building an 8G plant.
While Taiwan’s firms possess advanced manufacturing capabilities and superior operations management, failure to create brand recognition has been their weak spot. On the other hand, the mainland’s LCD TV suppliers enjoy a 78-percent share in a market set to become the world’s leading buyer of various display products. “Collaboration between the two sides will be a perfect combination,” Wu stressed. Localized operations can also cut transportation costs and avoid the high tariffs levied on imported LCD TVs, he added. (To be continued)
Write to Meg Chang at meg.chang@mail.gio.gov.tw