AU Optronics to Build New Fab, Eventually
AU Optronics (2409.TT), is the 4th largest LCD panel producer globally and has taken a different path than many of its competitors over the company’s more than 25 year history. While in the early years AUO built capacity in Taiwan, purchased capacity in Singapore, and eventually expanded into China, the company has done relatively little in terms of expanding production capacity over the last 5 or 6 years, a period when Chinese panel producers have expanded LCD capacity rapidly while South Korean panel producers have gone in another direction, reducing LCD capacity and focusing on OLED production.
We have noted recently that AUO has decided to expand capacity at their Kunshan, China Gen 6 fab by 28.6% this year, but has remained more focused on upgrading its older fabs than constructing new ones. That is going to change over the next few years as the company has announced it will be acquiring land and developing power and engineering capabilities for a new fab in Taiwan. The capex budget for this project will be NT$5b ($180.3m US) this year, and will increase to NT$28b ($1.01b US) as the project develops, with the equipment purchases likely to begin in 2023, pushing the overall project cost to between $3.6b and $5.4b. Based on those expectations, we expect the new fab will be built in at least three phases, with the first completed in 2025, and the additional phases being built out over an additional 2 – 3 years.
AUO did not give additional details about the fab other than it is expected to be a Gen 8.5 or Gen 8.6 fab and that it will be focused on IT panel production, but owing to AUO’s conservative nature as to capacity expansion, we would expect the full build out might take many years and potentially change a bit over time. The land and infrastructure construction is just a start for what will become another major fab for AUO, and will eventually add to their automotive and premium IT panel production capabilities. AUO however has shied away from OLED panel production and has become more focused on LEDs as an advanced display source, so there is the possibility that phase 2 or 3 of the new fab might have a different production orientation when it is built out, although for now, the orientation would still be LCD..
We have noted recently that AUO has decided to expand capacity at their Kunshan, China Gen 6 fab by 28.6% this year, but has remained more focused on upgrading its older fabs than constructing new ones. That is going to change over the next few years as the company has announced it will be acquiring land and developing power and engineering capabilities for a new fab in Taiwan. The capex budget for this project will be NT$5b ($180.3m US) this year, and will increase to NT$28b ($1.01b US) as the project develops, with the equipment purchases likely to begin in 2023, pushing the overall project cost to between $3.6b and $5.4b. Based on those expectations, we expect the new fab will be built in at least three phases, with the first completed in 2025, and the additional phases being built out over an additional 2 – 3 years.
AUO did not give additional details about the fab other than it is expected to be a Gen 8.5 or Gen 8.6 fab and that it will be focused on IT panel production, but owing to AUO’s conservative nature as to capacity expansion, we would expect the full build out might take many years and potentially change a bit over time. The land and infrastructure construction is just a start for what will become another major fab for AUO, and will eventually add to their automotive and premium IT panel production capabilities. AUO however has shied away from OLED panel production and has become more focused on LEDs as an advanced display source, so there is the possibility that phase 2 or 3 of the new fab might have a different production orientation when it is built out, although for now, the orientation would still be LCD..
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