AU Optronics Gets China Fab Buyout Approval
Back in April we noted that Taiwan based AU Optronics (AUOTY) was planning to both buy out its joint venture partners and add capacity to its Gen 6 LCD fab in Kunshan, China. The deal had been waiting for approval from the Taiwan Investment Commission, which has been reviewing the transaction. According to local press, the Commission has approved the deal, allowing AU Optronics to purchase the 49% stake held by the Jiangsu Kunshan Development Zone Construction Group for $617m, making the fab a wholly owned subsidiary. This will allow AUO to add what we believe will be ~9,000 sheets/month of capacity to the existing 36,000 sheet/month layout, with a planned timeline of 3Q 2022 as the opening of the new line.
AU Optronics has been quite conservative toward expanding capacity over the last few years and has spent more time and capital upgrading its LCD production processes and shifting production toward higher margin products, so this transaction, and the capacity expansion, albeit small by industry standards, are a change for AUO and are indicative of the more optimistic view panel producers have of the current panel cycle. That said, we expect AUO is looking past current prospects and is looking to broaden it capabilities on a more general basis, with emphasis on the IT and automotive display spaces. Given AUO’s conservative nature, we see relatively little risk in the expansion regardless of the prospects for the next few quarters.
AU Optronics has been quite conservative toward expanding capacity over the last few years and has spent more time and capital upgrading its LCD production processes and shifting production toward higher margin products, so this transaction, and the capacity expansion, albeit small by industry standards, are a change for AUO and are indicative of the more optimistic view panel producers have of the current panel cycle. That said, we expect AUO is looking past current prospects and is looking to broaden it capabilities on a more general basis, with emphasis on the IT and automotive display spaces. Given AUO’s conservative nature, we see relatively little risk in the expansion regardless of the prospects for the next few quarters.
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