Friday, April 07, 2006

LCD merger The small world of manufacturing liquid crystal displays (LCDs) took a step to further consolidation as Taiwanese firm AU Optronics (AUO) announced its agreement to buy Taiwanese rival Quanta Display. The $2.2 stock swap deal will make AU Optronics, already #3 in the field, and even stronger competitor. LCD displays are used most for computer displays and flat-screen televisions. As a Wall Street Journal article ("AU Optronics Plans to Buy Quanta In Stock Swap Valued at $2.2 Billion", 4/7/06) notes: The LCD industry grew quickly over the past decade, evolving from the screens of notebook computers into desktop monitors, cellphones and TVs. Rooted initially in the U.S. and Japan, Korean and Taiwan manufacturers became the dominant producers after gaining technical know-how and finding capital for the huge investments required for the bigger screens of monitors and TVs. But LCD prices have been falling, over 17% over the past year. That's good news for the companies, as more people are buying at the lower price, but it puts even higher demands on capital investment for more efficient production, Total expenditures for the industry on technology and plant upgrades is expected to be over $10 billion in the upcoming year, according to a Bloomberg story. The two leading firms in this growing industry are two South Korean firms, LG.Philips LCD Co. and Samsung Electronics Co. Each of those companies have 22% market share, while the new AUO will have a 19% market share. Up until now, according to the WSJ article, Taiwan's LCD industry has been "spread through a dozen companies that sprang from manufacturers of PCs and semiconductors". AUO itself is the result of the 2001 merger of Taiwanese firms Acer Technology and Unipac Optoelectronics. A more recent deal in the industry was China's BOE Technology Group's acquisition of Hynix Semiconductor Inc.'s flat-panel business in 2003. More consolidation among the smaller Taiwanese companies seems inevitable. 10:23:38 AM

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