Taipei, Amid lingering uncertainty over the global flat panel industry, a disposal plan of an advanced liquid crystal display (LCD) plant of Hon Hai Precision Industry Co. in China reported by Reuters is the right business strategy, according an analyst.
In the wake of a continued oversupply in the global market, it will be difficult for LCD makers to see a clear picture about their business prospects, according to Tsai Minghan a manager at Cathay Futures.
It could be the right business strategy for Hon Hai to dump the plant now, Tsai said.
The Reuters report said Friday that the company is exploring the possibility of selling its new US$8.8 billion flat panel factory in Guangzhou.
According to the report, Hon Hai has entered negotiations to appoint banks to find a buyer for the Guangzhou plant, construction of which is still under way.
In response to the report, Hon Hai, known as Foxconn on the global market, said the company does not own the Chinabased panel plant and is unclear about any possible disposal of the advanced 10.5thgeneration flat panel plant, which will specialize in largesized highdefinition screens for TVs and other electronic devices when it is completed.
Although Hon Hai does not own the plant, the factory is owned by Osakabased Sakai Display Products Corp. (SDP), a joint venture between Terry Gou founder of Hon Hai, and Japan's Sharp Corp.
At the end of December 2016, Gou signed an agreement with the Guangzhou authorities to invest 61 billion Chinese yuan (US$8.86 billion) to build the flat screen complex, focusing on largesized LCD panel production.
It is the largest single investment project in Guangzhou since the start of China's economic reforms in 1978 under former Chinese leader Deng Xiaoping.
According to the Reuters report, the disposal plan of new Guangzhou plant is due to weakening demand caused by escalating trade friction between the United States and China, which has disrupted technology global supply chains in a major way.
In Taiwan, the two largest flat panel makers AU Optronics Corp. (AUO) and Innolux Corp. continued to report a net loss for the second quarter, largely due to a supply glut.
AUO incurred NT$0.28 (US$0.009) in loss per share in the second quarter after a net loss of NT$0.38 in the first quarter, while Innolux, a subsidiary of Hon Hai, also reported a net loss of NT$0.30 in the second quarter after a net loss of NT$0.37 in the previous quarter.
In addition to the supply glut and the WashingtonBeijing trade dispute, Tsai said the Guangzhou plant is expected to feel the pinch of the impact of rising popularity of organic lightemitting diode (OLED) screens, which could further erode the LCD market.
It is just a matter of time, Tsai said, referring to a fall in market share commanded by largesized LCD screens due to the presence of OLED displays
Through disposal of the Guangzhou plant, Hon Hai is expected to secure more funds to develop OLED screens in the future, including critical display components, Tsai said. If Hon Hai needs to depend on other component suppliers for OLED screen production, it will face a big business risk.
According to the Reuters report, talks about the disposal plan remain in the initial phase and no price tag has yet been agreed upon.
The Guangzhou plant, which is scheduled to begin mass production at the end of September, is expected to roll out 90,000 units of glass substrates per month, 3,370 mm x 2,940 mm in size, which will be mainly used for the production of 65inch and 75inch high definition screens to create an 8K technology ecosystem in China's Pearl River Delta area.
Source: Focus Taiwan News Channel