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AUO and Innolux to Tap Market for Wearable Electronic Display Panels

2015/01/21 | By Steve Chuang

To capture considerable business opportunities from the wearable electronic boom, AU Optronics Corp. (AUO) and Innolux Corp., Taiwan's biggest two suppliers of such displays by shipments, are both eying the higher-margin applications to secure strong growth momentum.

DisplaySearch, a global display market research firm, reports that the global market for wearable electronics, mainly categorized into headwear devices, activity trackers and smart watches, is expected to take off beginning in 2015. Smart watches are expected to show the strongest growth potential, mainly because such devices are easier to operate and more functional than the other two categories due largely to the the compatibility of existing smartphone apps to smart watches.

Global display panel makers are exploring the market for high-margin displays for wearable electronics.

Compared to their Chinese counterparts, such as BOE Co., Ltd. and EverDisplay Optronics (Shanghai) Ltd., who have focused on AMOLED (active matrix organic light emitting diode)-based displays for wearable electronics, AUO and Innolux both plan to tap the potentially lucrative segment with LTPS (low temperature polysilicon)-based displays initially to ensure a solid footing in the competitive landscape.

AUO plans to begin mass producing displays ranging from 1.33 to 2.59 inches in size, in 2015. It will focus on LTPS models since such displays outperform conventional displays made using a-Si (non-crystalline thin-film silicon) technology in brightness, energy efficiency and image resolution.

DisplayResearch notes that although AMOLED-based displays will account for only a small part of AUO's output of display panels for wearable electronics this year, the higher-end models are expected to account for a growing share of output in the coming years, given that exceptional flexibility makes such components well-fitted in smart watches. In fact, the firm is the only display maker in Taiwan capable of mass producing AMOLED displays.

AUO has received an order from Asus for AMOLED displays to be used in the latter's Zen Watch. The 1.63-inch screen watch has received good reviews and strong demand thanks to its price-performance balance. Asus expects to ship 300,000 to 500,000 of Zen Watches in 2015, helping AUO to fill capacity at its 3.5-generation AMOLED display factory.

Innolux is also developing display panels ranging from 1.3 to 1.6 inches in size using LTPS technology as an initial strategy to penetrate the segment for displays for wearable electronics. It plans to kick off mass production this year.

Since turning profitable in Q1, 2014, AUO posted cumulative revenue of NT$339.72 billion (US$11.32 billion) for the first 11 months of the year, down 2.26% year-on-year (YoY), and net profits of NT$7.33 billion (US$244.33 million) for Q3, rising 194.48% YoY. Innolux posted in NT$7.35 billion (US$245 million) in net profits in Q3, 2014, up 973.23% YoY, with January-November revenue of NT$390.45 (US$13.01 billion), edging up 0.02% YoY.

The outlook for Taiwan's display panel industry in 2015 is brightening for several reasons, including the steadily growing popularity of ultra high-definition televisions worldwide and the weakness of the New Taiwan dollar against the greenback, raising expectations that local display panel makers will see even better results in than in 2014.

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AUO and Innolux's Cumulative Revenue and Net Profits in 2014
Company

Jan.-Nov. Revenue

YoY Growth Rate

Profits for Q3

YoY Growth Rate

AU Optronics Corp.

NT$374.498 Bn.

- 2.22%

NT$7.332 Bn.

194.48%

Innolux Corp.

NT$390.452 Bn.

0.02%

NT$7.358 Bn.

973.23%

Source: Market Observation Post System