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into the Chinese market is risky, but they are also fully aware they
have no choice, analysts said. Even though they are major revenue
earners, the island's LCD makers got off to a late start, struggling
for years to match stronger Japanese and Korean rivals, and they
hope China will give them the leverage they need to catch up. "We're
eager, if the government can give the go-ahead," said Hsiao Ya-wen of
AU Optronics, the world's third-largest flat panel maker after
Samsung Electronics Co and LG Philips Co. AU Optronics currently
operates two Chinese module plants -- low-end facilities that do not
give away much know-how -- and announced in June plans for a third one
in a joint venture with Sichuan Changhong Electric Co. It could soon
see its activities move to a whole new level. Economics Minister Shih
Yen-hsiang told parliament last week Taiwan may relax curbs on
high-tech investments in the mainland by local LCD companies. A
bigger role in China could be a huge boon for makers of LCDs -- used
in everything from cell phones to computers and e-books -- due to
the strong appetite among the mainland's newly rich for cutting-edge
electronic products. The interest runs both ways, with AU Optronics
vice president Paul Peng confirming recently that his company had
received invitations from several Chinese city governments to set up
plants once the high-tech curbs are eased. But analysts also see
risks that may face Taiwanese panel makers once they are permitted
by the government to open up " eighth-generation" production plants in
the mainland, introducing sensitive technologies. "Chinese companies
may ditch Taiwanese partners once they acquire their badly needed
cutting-edge LCD know-how," said Nancy Liu, an analyst with Taiwan's
quasi- official Industrial Technology Research Institute. Liu added
the same concerns are factors for Seoul and Tokyo while considering
whether to share their state-of-the-art technologies. But in Taipei
the concerns are all the more serious, because Taiwan and China were
arch foes for decades after they split at the end of a civil war in
1949. However, ties between Taipei and Beijing have been warming fast
since Ma Ying-jeou of the China-friendly Kuomintang party was
elected president last year on a promise to boost trade and allow in
more Chinese tourists. "It would be a very good opportunity for
local flat panel makers," said Alex Huang of Mega International
Investment Services. "It would allow them to get close to their
Chinese clients in addition to reducing costs. AU Optronics is a prime
example of how the entire industry is still burdened by having
joined late. The company started from scratch in 1996 and merged with
a Taiwanese company in 2001 and another one in 2006 , fast becoming
the leading flat panel maker here. But it faces intense competition
from abroad. "The huge number of patent rights owned by the Japanese
and Korean makers have formed high barriers for the latecomers," said
Liu of the Industrial Technology Research Institute. They may have to
pay high royalties for the patent rights owned by the industry
leaders or face infringement charges, she said. The huge demand from
the Chinese market may not just help Taiwan's LCD makers with their
long-term problem of narrowing the gap with rivals, but also the more
immediate issue of coping with the global crisis. Taiwan's screen
manufacturers were hit harder by the worldwide economic downturn
than their Japanese and Korean competitors. "Local panel makers are
short of brand names like Sharp, Samsung and LG," said Liu. In order
to meet overseas demand, the three global brands purchased panels
from Taiwan suppliers, but slashed orders when the economic meltdown
bit and demand slumped late last year. As a result, the utilisation
rate of Taiwanese makers tumbled to below 40 percent while their
Korean rivals still enjoyed a comfortable 80 percent utilisation
rate, according to Liu. "But they would be able to ensure outlets
for their products if they can secure orders from China by making
products there," she said.
