TCL Panel Great Leap Forward: Huaxing Optoelectronics or CPT

It is reported that on December 10th, A-share listed company Huaying Science and Technology (000536.SZ) was suspended due to a major asset reorganization, and Huaxing Optoelectronics' participation in the restructuring of Chunghwa Picture Tubes once again raised concerns.

TCL Holdings 55% of China Star Optoelectronics 8.5 Generation Line completed its cumulative shipments from 1 million to 10 million units in only 7 months. As the second largest supplier of LCD TV panels in China, Huaxing Optoelectronics is only a high-generation line, which is at a disadvantage in competition with Samsung, LGD, and AUO with multiple panel production lines. Through mergers and acquisitions, TCL has created the “Kingdom of Panels”. "shortcut.

On December 17, Zhang Bing, market research director of market research firm Displaysearch China, told this reporter that “China Star’s shareholding or acquisition of Chunghwa Picture Tubes has been rumored for a long time. Huaxing Optoelectronics is also using LCDs in Shenzhen and Jiangsu Wujiang. The group factory is supporting its panel factory. At the same time, Huaxing has a keen interest in Huaying's touch screen and small and medium size panels."

Huai Ying Breakthrough Small and Medium-sized TCL Group General Manager Brand Management Center Liang Qichun told the reporter on the 17th, “It is market rumors. So far the two sides are in the business complementarity level, not the capital level.”

Before investing in China Star Optoelectronics 8.5 generation line, TCL Group once invested in the overall integration of liquid crystal modules in Huizhou, but the design capacity of Huaxing Optoelectronics 8.5 generation line is 14 million, and after the expansion in March next year will reach 16 million, Huizhou model It is difficult to meet the needs of Huaxing Optoelectronics for the production capacity of the group factory

According to a person familiar with the TCL Group, “In such circumstances, Huaxing Optoelectronics has established a cooperative relationship with the module factory of Guangming New District Huaying across the street. Similarly, TCL has participated in the Samsung Electronics 8.5 generation line in Suzhou, and In Wuxi, there is a LCD TV factory, so it has also cooperated with Huaying's module factory in Wujiang, Jiangsu Province."

With only one 8.5-generation line, Huaxing not only has difficulties in controlling costs compared to global panel giants such as Samsung, LGD, Chi Mei, and AUO, but also faces smartphones, tablet computers, various touch screen devices and ultrabooks. The field of small and medium-sized panels such as faster growth has become the largest short board of Huaxing Optoelectronics.

Panel industry experts told reporters, “Huaxing Optoelectronics's products are mainly 32-inch LCD TV panels. Although 46-inch, 55-inch, and even 110-inch LCD panels have been developed, more than 70% of its future products are still low-end. For 32-inch panels, mergers and acquisitions are the best way to achieve a breakthrough in small and medium size and touch screen business."

Unlike BOE, which is gradually building its own panel kingdom from the 5th generation line, TCL cannot be extended by self-built small and medium-sized panel production lines in the current situation. Therefore, local governments’ interest in the low-generation line is far lower than in the past. Generation line.

M&A or equity participation is an important expansion method for Huaxing, and Taiwan’s third-largest panel maker, Huaying, is a good choice. Before TCL and Samsung adopted cross-shareholdings, they owned a 10% stake in Suning’s Samsung 8.5 Generation Line.

The management of Huaying, which was in a difficult business, once stated that it did not rule out any opportunities for external cooperation. It is reported that Wang Xing, vice president of China Star Optoelectronics, has been to Taiwan for several times to discuss details of the merger.

TCL Transfusion Saves Redemption Huaying Chunghwa Picture Co., Ltd., a subsidiary of Taiwan Datong Group, is the first company in Taiwan to successfully transform LCD panels from CPT, but after completing the 6th-generation line investment in 2007, the majority shareholder’s exposure to the panel business and CPIC’s management’s Infighting, the 7.5-line investment plan was continuously postponed and finally cancelled.

After the financial crisis in 2008, the global LCD panel business fell into a trough. At the same time, due to the withdrawal of single companies such as Samsung, Huaying’s panel business performed even worse. Its stock price has been hovering for a long time in a low position. Even if private equity funds are introduced, it is difficult to improve. In order to avoid delisting, the management decided in 2010 to reduce capital by 60% to reduce accumulated losses of NT$100 billion.

In the years of crisis, Huaying's investment has basically ended in failure. In 2008, A shares Xiamen Overseas Chinese Electronics and Proview Technology Co., Ltd., both companies suffered business decline. To date, Xoceco's liquidity still requires major shareholder Huaying to provide short-term loans.

Although the successful backdoor *ST Jidong completed the asset integration of the seven factories in China, the main business panel of CPT has not yet made a loss, especially in the large-size panel industry, which currently relies only on some of the 6th generation capacity. Production of 32-inch and 37-inch panels, but after the production of BOE and China Star Optoelectronics 32-inch panel production volume further reduced.

According to November's data from Chunghwa Picture Tubes, shipments of its large-size panels have dropped by more than 66.9% year-on-year, while overall panel revenue has fallen by more than 20% year-on-year since the beginning of this year. In the event that AUO and Chi Mei are expected to make profits in the fourth quarter, China Yingying’s earnings are still far away.

At the same time, Huaying Technology's financial statements show that as of June 30, CIC Technology’s short-term liabilities were approximately RMB 900 million, and as of September 30, CIC Technology’s short-term liabilities were as high as RMB 1.5 billion. A short period of three months of borrowing almost doubled.

In the field of high-density panel high-end panels for high-end smart phones and tablets, Cineplex is still unable to upgrade its existing production lines and technologies compared to Japan’s Sharp, JAPAN DISPLAY and South Korea’s Samsung and LGD. This requires a large amount of money. funds.

Zhang Bing said that several panel production lines of Chunghwa Picture Tubes are now leading global small and medium size panel companies after the completion of small and medium-sized transformation. Because Samsung, LGD, and AUO are not interested in the coincidence of the production line of Huaying, Huaxing Optoelectronics is a better partner.

For Huaxing Optoelectronics, the first operating year after the start of production began to make profits continuously from September. Shipments of 1.88 million tablets jumped to the top 5 in the world in October. It was evident that its management lamented that it had encountered a good year. Also considering that if the LCD panel industry intends to enter a decline cycle, a single TV panel will encounter troubles as LCD TV growth continues to slow.

According to the relevant person of TCL Group, “In the panel area, we must form a group advantage to be able to achieve the maximum in cost and risk control. From the current point of view, Chunghwa Picture Tubes, which has a low level of participation or share price, is a good choice.”