Gov’t exploring integration of display panel companies

The China Post news staff

The Council for Economic Planning and Development (CEPD) will help explore the possibility of helping integrating the leading display panel manufacturers in Taiwan. But officials say the final decision lie in the makers’ own hands. Reports say government officials suggested the integration of AU Optronics (AUO) and Chime Innolux Corp. to pool resources to tide over the present business difficulties and take on future challenges,

But industry analysts were generally pessimistic about a possible merger. They say it will be a tough task to persuade two large enterprises into consolidation because of the business mentality of Taiwanese entrepreneurs and different corporate cultures.

CEPD Chairwoman Christina Liu confirmed yesterday that she would meet with chairman Lee Kun-yao of AU Optronics next Tuesday for face-to-face exchange of views on industrial development. Liu said she would also like to share the industrialist’s views about a possible integration plan during the discussion. The integration of strengths and resources of various enterprises has become a major international trend in the increasingly competitive world markets, Liu pointed out. Considering the operating difficulties faced by the flat panel industry, Liu said she is keen on learning about what proper assistance can the government provide. Both AU Optronics and Chimei Innolux has suffered heavy losses after being hammered by international competitors from South Korea and Japan while still facing the mounting financial pressures from huge bank loans. They are poised to face even stiffer challenges as three giants in the display panel industry — Sony, Hitachi, and Toshiba — have just integrated resources to jointly set up a super company to cope with challenges from Korea and Japan. Executives at AU Optronics and Chimei Innolux have so far showed reservations about the proposal for them to join forces like their counterparts in Korea and Japan. They said they were not fit for making any comments because they still do not understand “the government’s intentions.” Industry observers say enterprises in Taiwan like to consider the moves concerning mergers and acquisitions as an option to form alliance and tackle business difficulties. Taiwan has relatively few successful M&A cases, which have long been adopted as a common practice in the Western nations.

Liu and other CEPD officials said they fully respect the final decisions of the companies themselves. The government was forced to abandon a proposal two years ago to provide assistance for Taiwan’s money-losing DRAM enterprises to form Taiwan Innovation Memory Co. (TIMC) as a collective joint venture because the companies could not reach consensus on the restructure plan designed to help them overcome difficulties. The DRAM manufacturers are also under increasing pressure on business slumps and enormous debts owed to financial institutions. Instead of dealing with the lukewarm response on integration strategies as shown by Taiwan enterprises, the government should use resources and waste no time to help induce the development of new and innovative technologies for the faster development of new generation of industries, industry analysts suggested.