DAIKIN

AUO, Innolux Bracing For Future With Different Strategies

AU Optronics (AUO) and Innolux, which have been regarded as the “two tigers” of Taiwan’s flat panel industry as far as their production capacities are concerned, are heading in different directions for their future developments, judging from the strategies adopted by the two firms.

Along with the changing environments of recent years, AUO has been focusing its development on pursuing technology differentiation, quality optimization and high value-added product portfolios based on three main strategies: maintaining an optimum production scale, implementing value transformation and continuing technology innovation.

For maintaining an appropriate production capacity, AUO has been trying to keep its most valuable production lines running at full capacity, while ramping up the output of its new production lines through “smart investment” aimed at achieving a high capital return ratio and higher portion of value-added products.

Additionally, AUO has also managed to raise the ratio of high value-added and cost-effective products by improving its product portfolios continuously. For instance, AUO are producing high-priced panels for cultivators, yachts and automobiles. Panel shipments to the yacht industry total about only 100,000 units a year with each unit commanding a price of over US$5,000; such shipments are lucrative and steady.

Panel products for similar commercial applications also bring higher value and profits. These are the so-called “blue ocean” market segments that involve production in small volumes with diverse designs, customization, or designs for new applications. In response to these requirements, AUO has managed to reach the best utilization of its older and newer generations of production lines leveraging its technology innovation and management capabilities.

AUO has also been looking for “blue ocean” segments in the consumer LCD panel sectors such as panels for TVs, monitors, notebooks and handsets, which together account for 90% of global flat panel shipments in terms area shipments.

The gaming monitor is currently a typical “blue ocean” segment for flat panel makers. Panels made for gaming monitors are priced much higher as compared to those for regular ones. AUO has been able to jack up its profits by adjusting its production lines for making gaming monitor panels when panel prices are under downward pressure.

AUO is also strengthening its deployment in 8K and ultra large panel segments in which shipments of 75- and 85-inch panels have been growing fast in 2018.

Shipments of high value-added products currently account for over 50 percent of AUO’s total sales, and the company aims to maintain it at over 50% in the long term to sustain its profitability.

On the other hand, Innolux’s parent company Foxconn Electronics is apparently attempting to turn itself into a big conglomerate.

Sakai SIO International under the Foxconn Group is building a 10.5G line in Guangzhou, China, while Foxconn has unveiled a plan to construct a 6G IZGO panel line in Wisconsin. The Foxconn Group, which also includes display subsidiaries Innolux, Sharp and Century Technology (Shenzhen), is already the world’s second largest LCD panel maker in terms of production capacity, trailing after BOE Technology but ahead of Samsung Display and LG Display.

Leveraging on its high production capacity, Foxconn, as a group, is not only competing in niche-type product sectors but also in the commodity market, with the proportion of focus on mainstream and non-mainstream products standing at 70:30 or 80:20.

Utilizing its established R&D and smart manufacturing capabilities, Innolux has also striving to develop value-added, diverse and platform products. The company’s recent move to restart the production of complete sets of TVs is part of its efforts to build up the last stop of a total supply chain to optimize the value of its production capacity.

For the diversification of operations, AUO’s subsidiaries AUO Care offers smart health care solutions, U-Fresh Technology provides smart water recycling solutions, and Space4m supplies smart integrated retail solutions.

Innolux also reportedly plans to set up a number of subsidiaries but with a different approach.

Recent market speculations have indicated that Innolux plans to spin off its automotive panel unit and incorporate the unit into Century Technology; and that it will also spin off its large-size panel unit for a planned merger with Sakai SIO International. After the reorganization, both Century Technology and Sakai SIO will seek to list in China, according to the speculations.

Innolux has dismissed the speculations. But there are pros and cons of spinning off the business units. For those who support a spin-off say Innolux will continue to serve as a major shareholder of splitted entities, and Innolux will enjoy the benefits from the rising market value of its these new entities. It remains to be seen what approaches Innolux will adopt in this respect.― Digi Times

Share this:

Leave a Reply

Your email address will not be published. Required fields are marked *

Stay Updated on TV Veopar Journal.
Receive our Daily Newsletter.