Taipei, Oct. 24, 2008 (CENS)--Hon Hai Group`s subsidiary Innolux Display Corp. and its Taiwanese counterpart Chi Mei Optoelectronics Corp. (CMO) are reportedly planning to team up against AU Optronics Corp. (AUO), Taiwan`s largest display panel maker, to lead the industry on the island, according to industry sources.

Institutional investors noted that, if such teamwork is realized, Innolux and CMO will very likely wield more influence in the global industry of display panels than before, while the Hon Hai Group will also consolidate its lead in the global market for EMS (electronics manufacturing service).

Innolux now is world`s second-largest supplier of LCD (liquid crystal display) monitors and operates one each 4.5-generation and 5-generation factory. Although Hon Hai Group has recently won orders for LCD TVs from Sony, Innolux, however, is short on capacity to fill such orders, which prompts the firm to consider cooperation with CMO.

As a world-caliber supplier of display panels, CMO boasts ample productivity capacity of LCD TV panels, shipping 2.2 million units as world`s leading supplier of this kind in August, according to DisplaySearch`s estimates. Hence, insiders widely believed that the alliance, which is going to integrate resources at Innolux, Hon Hai and CMO, will be probably successful.

CMO plans to raise its production capacity of LCD panels by 40% in its 6-generation, 7.5-geneartion and newly constructed 8.5-generation fabrication plants this year; however, such rapid capacity expansion has already impacted the firm`s financial health. According to its second-quarter financial report, CMO has only NT$27.751 billion in cash, far less than the corresponding figure of NT$93.048 billion held by AUO in the same quarter. Hence, cooperation with Innolux will help the firm to significantly improve the situation.

From another view point, the Hon Hai Group can also secure needed capacity of LCD panels by spending less than NT$1.5 billion to acquire a 10% stake in CMO. Such cost-efficient investment, compared with its plan to build a 7.5-generation plant on its own for hundreds of billion New Taiwan dollars, makes the joint venture very attractive and a real possibility, according to industry insiders.

(by Steve Chuang)