The days of Taiwan’s "Five Tigers" — five major LCD manufacturers — are a rapidly fading memory. More recently, there have been two tigers — AUO and Chi Mei Optoelectronics (CMO), pretty much in that order - and three housecats: CPT, Hannstar, and Innolux. But Innolux is owned by the very deep-pocketed Hon Hai (Foxconn), and CMO has a lousy debt/equity ratio, along with excellent technology, advanced-generation manufacturing facilities, and an extensive customer base.

Ken Werner
Senior Analyst and Editor

That set up the purchase of CMO by Innolux, which was announced in November 2009. CMEL, Chi Mei’s OLED subsidiary, is included in the purchase, as is TPO, the separate maker of small displays, which has LTPS fabrication capability and has developed OLED technology (but has no commercially available OLED products).The new entity, Chimei Innolux Corp., will be officially launched in March.

In November, David Hsieh (citing DisplaySearch-compiled data) observed that the new company will be the third-largest TFT-LCD maker (based on area capacity), with a combined 17% of total industry capacity compared to 24% for Samsung, 21% for LG Display (LGD), and 16% for AUO. But now, Chimei Innolux — shall we call it CI? — says it expects to pass LGD in Q3′10 to become the world’s second largest LCD panel maker. That’s not what Hsieh says, who projects the CI share to remain at 17% through 2012, with both Samsung and LGD remaining at 20% or above. Time will tell who is right.

Regardless of these details, the merger makes sense on several levels, and represents one more big step in the ongoing consolidation of the display industry.

None of this means the always-aggressive AUO is ducking for cover. On the contrary, Taiwan’s soon-to-be Number Two display maker has set up an employment office in southern Taiwan to recruit Chi Mei workers before the CMO-Innolux merger is finalized, industry sources told Rebecca Kuo and Yvonne Yu of DigiTimes. Although AUO denies these reports, the sources say AUO wanted to be in place before CI sends out letters offering employment to current CMO employees on January 29. CMO employees who don’t want to work for CI will receive severance pay.

AUO is also being aggressive in expanding its portfolio of display technologies. After buying SiPix last year and aggressively rolling out eBook products and reviving its AMOLED program, the company announced earlier today that it will purchase certain FED technologies and assets from Field Emission Technologies (FET), the company spun out from Sony to develop Sony’s FED technology. FET pretty much collapsed last year when Sony (and everybody else) refused to pony up the equivalent of $300 million to purchase manufacturing facilities from Pioneer to begin manufacturing professional monitors in some volume.

Although impressive displays have been made with FED technology, we thought (and still think) the industry was being realistic in not making that $300 million bet. But AUO CEO L.J. Chen thinks differently: "FED technology will be an appropriate fit, especially for the high-end market needs such as medical or broadcast displays. With the successful cooperation with FET, AUO intends to utilize FET’s resources of FED technology to commercialize products."

That’s the sound of AUO roaring back at Chimei Innolux.