Taiwan panel makers still competitive: Q&A with AUO president Paul Peng
Rebecca Kuo, Taipei; Adam Hwang, DIGITIMES [Tuesday 22 October 2013]

Taiwan-based TFT-LCD panel maker AU Optronics (AUO) saw its business operation swing from total net loss of more than NT$130 billion (US$4.3 billion) during 10 consecutive quarters to net profit of NT$3.924 billion for the second quarter of 2013. AUO president Paul Peng attributed the return to profitability to efforts to develop technologies and new products, and to seek new clients.

Digitimes recently talked to Peng, who is also president of the Taiwan Display Union Association (TDUA), about the display industry and the comany’s operations.

Q: What has AUO been doing over the past two years of so?

A: AUO has launched Ultra HD panels, eTP touch panels and wide color gamut technologies. In addition, AUO has made progress in developing AMOLED and has begun volume production of small-size AMOLED panels.

Q: What is the consequence of China-based panel makers’ capacity expansion?

A: As the average size of device screens is on the rise, global demand for display panels in terms of total area is rising. While China-based competitors have been expanding production capacities, Taiwan-based panel makers have fully depreciated the equipment at many production lines and therefore have become more competitive in terms of production cost. Direct cooperation between Taiwan- and China-based panel makers is quite impossible due to antitrust restrictions. However, there is much room for Taiwan-based panel makers to cooperate with China-based component makers or terminal device vendors. Taiwan’s display industry complements that in China, the former stronger in terms of technology, production management, supply chain resources and cooperation with international vendors, and the latter in a better position in terms of capital, market size and brands.

Q: Some people think that Taiwan’s panel industry is so distressed that it is desperate in need of government help. What is your opinion?

A: I think Taiwan’s panel industry has good prospects in future development and therefore there is no need for government help.

Q: If the Taiwan government opens the job market to white-collar workers from China, what incentives can Taiwan-based employers offer?

A: Taiwan currently strictly controls the inflow of professionals from China, but many Taiwanese experts have been working in China. Compared with China, Taiwan has a relatively mature high-tech industry and long-time cooperation with international brand vendors. Such an environment can enable innovations and access to the international market, and therefore is itself a big incentive for Chinese white-collar workers.

Q: How can Taiwan-based panel makers cope with employees’ leakage of business secrets?

A: Cross-strait interactions have increased and it is important to protect business secrets. Taiwan’s Trade Secrets Act was amended and came into force on February 1, 2013. Although the amended law offers significantly better protection of trade secrets, there is still room for improvements. For example, when a legal dispute arises, the plaintiff is required to produce evidence. But it is difficult for Taiwan-based companies to collect evidence in China.

Q: What are your views of competition from Japan-, South Korea- and China-based panel makers? How competitive is AUO?

A: Japan-based makers have quit production of large-size panels but remain globally competitive in key materials and components. South Korea-based makers, through combination with their terminal device brands, have sufficient capital and strengths in marketing and boosting application of new technologies. However, it is not easy for South Korea-based makers to remain neutral because of the need to promote their own-brand devices. China-based makers are supported by the fast growing and large domestic market and have made much progress in technology and production capacity.

In such a competitive environment, Taiwan-based makers’ strengths come from their complete supply chains, flexible operation, technological capabilities and long-term cooperation with international brand vendors.

AUO has been carefully adjusting its product portfolios. For example, smaller production lines are used to produce low-volume, high-variety products, while larger lines handle standard panels in large volumes. AUO is also moving towards producing panels involving higher levels of technology to avoid competition with China-based makers. AUO is looking for added-value, that is, to produce high value through small investment utilizing in-house-developed technologies and supply chain resources.

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