AU Optronics Makes China Expansion Official
AU Optronics (2409.TT) held a ceremony to officially begin its capacity expansion project at its Kunshan, China Gen 6 LCD fab. While the expansion itself is relatively small, adding an estimated 9,000 to 10,000 sheets/month to the fab’s current 27,000 sheet/month capacity, we expect AUO has a further plan to add an additional line of the same capacity at a later date, for a total of 45,000 sheets/month. We expect there will be other upgrades to the fab, which began production in 3Q 2016. Based on equipment timelines, we expect the initial expansion to be completed in September of this year.
AU Optronics has been relatively conservative toward capacity expansion over the last few years, looking more toward developing leading edge products than garnering market share, the opposite tract of Chinese LCD panel producers who have been expanding capacity despite the risk of cyclical overcapacity that has plagued the display industry over much of the industry’s recent history. While AUO has spent ~$367m for equipment purchases to upgrade LCD production facilities in Taiwan since the end of August last year, much is going toward upgrades rather than capacity (other than Kunshan), which has allowed AUO to maintain a key position in a number of premium panel markets. While this philosophy might not have looked good during the rapid panel price increases seen in late 2020 and early 2021, the true test comes when the effects of weaker panel pricing drives down profitability for those in the commodity panel space, while premium product pricing is affected to a lesser degree, which we believe is the case currently.
.
AU Optronics has been relatively conservative toward capacity expansion over the last few years, looking more toward developing leading edge products than garnering market share, the opposite tract of Chinese LCD panel producers who have been expanding capacity despite the risk of cyclical overcapacity that has plagued the display industry over much of the industry’s recent history. While AUO has spent ~$367m for equipment purchases to upgrade LCD production facilities in Taiwan since the end of August last year, much is going toward upgrades rather than capacity (other than Kunshan), which has allowed AUO to maintain a key position in a number of premium panel markets. While this philosophy might not have looked good during the rapid panel price increases seen in late 2020 and early 2021, the true test comes when the effects of weaker panel pricing drives down profitability for those in the commodity panel space, while premium product pricing is affected to a lesser degree, which we believe is the case currently.
.
RSS Feed