Compal Electronics to enter touch panel manufacturing


TAIPEI — Compal Electronics Inc., one of Taiwan’s leading notebook computer ODM service providers, said yesterday that it would enter the touch panel manufacturing sector amid optimism about global demand for tablet computers.

The company said in a statement that its board of directors had approved a proposal to invest NT$2 billion in Heng Hao Technology Co. Ltd.

After the transaction, the statement said, Compal would hold a 100 percent stake in Heng Hao, which is expected to manufacture glass-type projected capacitive touch panels.

Out of the NT$2 billion, Compal would spend NT$1.4 billion to buy a 4.5th generation color filter facility and related production equipment from Chunghwa Picture Tubes Ltd., while the rest of the investment would be used as working capital by Heng Hao.

The new production plant, which would focus on medium- to large-sized touch panels, is scheduled to start operations in the fourth quarter of next year, Compal said.

“As expected, ‘Media Pad’ demand will report strong growth in the coming years, and investing in touch panel production could shorten the product design cycle and enhance product competitiveness,” Compal said in a statement.

TLG Asset Management analyst Arch Shih said that the move by Compal to enter the touch panel business is aimed at offsetting the impact of lower profit margins in the contract notebook computer production business, which is currently suffering from fierce global competition.

“As the gross margin has fallen to 4 percent or below in the notebook computer ODM business, Compal and many of its counterparts are eager to diversify their operations,” Shih said.

However, the market remains cautious about Compal’s new investment, as shares of the stock fell on the Taiwan Stock Exchange in yesterday morning trade, Shih said.

“The most important requirement for the success of a touch panel manufacturer is the yield rate. Heng Hao has no track record to show how good its technology is,” Shih said.

“It remains to be seen whether the new investment will pay off for Compal,” Shih added.