AU Optronics spending $3.27 bil. to stay ahead as display panel leader

15, Nov. 2021

AU Optronics Corp. plans to spend $3.27 billion through 2024 to continue upgrading its product lineup to keep market leadership. (Photo: AUO)
AU Optronics Corp. plans to spend $3.27 billion through 2024 to continue upgrading its product lineup to keep market leadership. (Photo: AUO)

By Gloria Cho

TAIPEI, NNA - Taiwan’s major display panel maker AU Optronics Corp. (AUO) plans to spend a staggering NT$91.08 billion ($3.27 billion) from now through 2024 to maintain its leadership despite oversupply concerns for next year.

It will allocate nearly half the amount or NT$40 billion for innovation to produce premium products and investment purposes, said AUO, which also plans to hire 2,700 more employees as it boosts production.

To meet the robust demand for high-end notebook panels and realize full operational independence, AUO will buy up the remaining 49 percent stake in its affiliate in China’s Kunshan for approximately $617 million, turning it into a wholly-owned subsidiary.

It will also raise an additional $384 million in capital for the subsidiary to ramp up LTPS (Low Temperature PolySilicon) LCD panel production to 47,000 units monthly.

Over the past two years, a massive surge in demand for notebook computers because of pandemic-induced work-from-home arrangement has resulted in a double-digit growth in notebook panel shipment as well as a price hike of more than 40 percent, according to Taipei-based research institute TrendForce.

In the third quarter ending September, shipment of notebook panels rose 7.1 percent from Q2 to hit a record 72.27 million units. Driving the increase are high-end thinner panels for premium notebooks using LTPS TFT (Thin Film Transistor) LCD technology which draws less power.

LTPS TFT panels are expected to have a global market penetration rate of 3.7 percent this year. Collectively, high-end OLED, LTPS, and oxide LCD panels for notebooks are expected to reach a 17.8 percent market share in 2021 and 21.4 percent in 2022, according to TrendForce.

Poised to capitalize on the strong market growth, AUO is the world's largest LTPS panel supplier, followed by China’s CSOT and Tianma.

AUO's Q3 consolidated revenue went up 3.6 percent to NT$99.05 billion, while achieving a net profit of NT$19.31 billion due to the buoyant demand for high-end notebook panels, even when TV and other consumer segments had slowed down.

The mobile PC and device segment contributed the largest revenue share of 29 percent.

AUO president and chief operating officer Frank Ko told an investor conference on Oct. 28, “The market went through some volatility in Q3. The supply chain was under the impact of ongoing component supply tightness, as well as new challenges such as power crunch and energy consumption limitations in China. Overall, the increases in capacity are slowing down and the effective capacity increases are limited.”

While the market for consumer products had slackened, commercial and gaming products as well as niche areas like industrial applications still enjoyed strong momentum, he reported.

On the outlook for the ending Q4 to the first quarter of next year, Ko expects the COVID-19 situation in emerging markets to improve with people returning to offices. This will bolster the demand for IT products for commercial and industrial applications, he said.

However, another major Taiwanese panel maker Innolux Corp. saw Q3 net profit falling by 13.1 percent to $18.6 billion.

“Some TV sizes price adjustments were below our estimates due to the increasing financial pressure on idle capital situations affected by the global port congestion crisis, while demand for other products such as IT, commercial, industrial control and medical panels remained stable,” explained Innolux in a statement.

For 2022, TrendForce believes that the growth in global economy and digital transformation will continue to drive the demand for commercial notebooks, while Chromebooks and consumer notebooks will likely continue to see a slowdown.

However, expectations differ between producers and market analysts.

While panel suppliers plan to ship about 330 million notebook panels in 2022, analysts have forecast lower demand figures of 279 million units. The discrepancy of 18.3 percent suggests a potential oversupply.

Speaking to NNA, TrendForce analyst Leo Chen warned, “If a corresponding demand for notebooks fails to emerge next year, the notebook panel market may enter into an oversupply situation, and hence, placing downward pressure on panel prices and narrowing the profitability of panel makers.”

However, the ever-growing strength in the industry is the TFT LCD technology used in both LTPS and oxide display products - which represents the most popular LCD technology and accounts for the majority of the global display market.

The global TFT LCD panel market reached a value of $150.2 billion in 2020 and is expected to achieve moderate growth over the next five years, said analyst firm Research and Markets.

TFT (Thin Film Transistor) is a superior active-matrix LCD with an improved image quality where one transistor for every pixel controls the illumination of the display enabling an easy view even in a bright environment.

Light in weight, slim in construction, high in resolution with low power consumption, TFT displays are gaining prominence in almost all the industries which require displays, said Research and Markets.

They find applications in cell phones, portable video game devices, televisions, laptops and desktops apart from being used in automotive industry, navigation and medical equipment, laser pointer astronomy, SLR cameras and digital photo frames.

Large-sized panels dominated the global TFT LCD market with the television industry accounting for the largest share.

The major players operating in this market include Innolux, AUO, LG, Samsung and Sharp.

The global market for flat panel displays (FPDs) was estimated at $146.6 billion in 2020, according to Global Industry Analysts Inc. It is projected to reach $171.6 billion by 2026, growing at a compound annual growth rate (CAGR) of 2.6 percent.

TFT LCD, one of the sub-segments, is projected to record a 0.7 percent CAGR to reach $112.6 billion by 2026, said the research company.