In late March 2010, AU Optronics Corp. announced that it had signed a memorandum of understanding with Toshiba Mobile Display Co. to purchase 100% of the shares of AFPD, a subsidiary of TMD in Singapore. AFPD is a manufacturing site for small- and medium-sized LCD panels based on low-temperature polysilicon (LTPS) technology. The Gen 4 facility is also, according to DisplaySearch analysts David Hsieh and Charles Annis, the only LTPS manufacturer in Singapore at this time.1
The financial details of the agreement have not been made public, and neither party was able to comment at press time. According to the official announcement from Toshiba, AUO is aiming to strengthen its competence in the high-end display market through the purchase. TMD reports that it will concentrate its resources on displays for mobile devices, including mobile phones and smartphones, and on automotive applications such as car navigation.2
Hsieh and Annis wrote in a recent DisplaySearch blog entry that Toshiba is making the sale to counteract decreasing demand for high-value-added panels and also to improve the financial status of its display business unit. They also reported that the Japanese press had indicated that AUO will pay ¥10 billion ($100 million) for the deal.
They wrote: "Reportedly, TMD is bracing for an operating loss of ¥28 billion during the year ending March 31, with sales declining an estimated 18% to ¥210 billion. The sale of the Singapore plant is in-line with Toshiba's efforts to restructure operations in order to improve profitability. Meanwhile, this sale also means that Toshiba will withdraw from the mobile PC panel production business." At press time, the word in the industry was that TMD was indeed discontinuing a number of its LCD panel offerings, several of which represent unique solutions that cannot be easily replaced. As a result, manufacturers were engaging in "last-time buys" and scrambling to find alternatives for the discontinued panels.
Hsieh and Annis offered opinions about AUO's motives: "With the establishment of ChiMei InnoLux, AUO is no longer the largest TFT-LCD maker in Taiwan. AUO is looking for ways to regain leadership, as economic scale is key in competition." They also noted that AFPD is dedicated to LTPS technology, whereas AUO has been struggling with LTPS yield rate for a while, so the acquisition should help AUO in that area.
The proposed transaction is subject to the signing of definitive agreements between AUO and TMD, as well as to any necessary approvals. At press time, a Toshiba spokesperson confirmed that the deal was scheduled to be finalized at the end of April.
Background and analyst commentary for this article were based on the DisplaySearch blog entry dated March 31, 2010 and listed above.
— Jenny Donelan