Mainland enjoys policy subsidies, Taiwan panel makers must fight hard

Mainland high-generation panel plants are gradually entering mass production, and they have government funding subsidies. Taiwan panel makers are striving hard on technology, but analysts believe the strength of mainland plants still cannot be underestimated.

Innolux chairman and CEO Tuan Hsing-chien recently stressed while speaking at a "bicycle road run" event that the depreciation and amortization of machinery and equipment costs for Taiwan panel makers will be completed by the end of 2014, and operating performance is getting better year by year.

Tuan Hsing-chien pointed out that in the face of drastic changes in the political and economic situation in mainland China, and the overwhelming pressure from 8.5-generation plant capacity, "we accept it and respond calmly"; in the past Taiwan relied too heavily on the mainland China market, and in the future layout in emerging markets, development of high-end technology, and module automation will be the driving forces for Innolux's profitability.

In addition to the existing CSOT Plant 1 and BOE's Beijing plant, mainland 8.5-generation panel plants including CSOT's Plant 2, BOE's Hefei plant and Chongqing plant, CEC Panda, as well as Korean maker Samsung's Suzhou plant and LG Display's Guangzhou plant will gradually enter mass production.

The massive input of new capacity from mainland high-generation lines will inevitably increase panel supply and bring downward pressure on prices. Taiwan makers will have to expend greater effort to seize the market.

WitsView deputy general manager Chang Hsiao-piao analyzed that although depreciation on Taiwan panel makers' 6-generation lines has been fully amortized, which helps lower costs and improve competitiveness; however, mainland Chinese panel makers receive policy support. When CSOT's Shenzhen 8.5-generation plant was first built, the Shenzhen municipal authorities provided land and funding assistance, greatly reducing the depreciation and amortization amount for machinery and equipment.

Mainland China has become the world's largest LCD TV market. Although Taiwan makers Innolux and AUO are the main panel suppliers, local brands give priority to domestic panels when purchasing TV panels. In particular, the well-known mainland brand TCL has ranked among the world's top 5 TV brands, and its invested panel maker CSOT will inevitably benefit. To compete with mainland makers, Taiwan makers indeed must put in more effort.