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AUO and Innolux Develop New Business Models
December 10, 2018

AU Optronics (AUO) and Innolux, Taiwan’s largest LCD panel makers are facing difficult challenges in LCDs, from the Chinese and in new OLED technology from the Koreans. But judging from the strategies adopted by the two firms, they are heading in different directions for their future developments. AUO has managed to reach the best utilization of its older and newer generations of production lines leveraging its technology innovation and management capabilities. Panel products for commercial applications, which bring higher value and profits, are so-called "blue ocean" market segments that involve production in small volumes with diverse designs, customization, or designs for new applications. In response to these requirements, AUO has also been looking for "blue ocean" segments in the consumer LCD panel sectors such as panels for TVs, monitors, notebooks and handsets, which together account for 90% of global flat panel shipments in terms area shipments. The gaming monitor is currently a typical "blue ocean" segment for flat panel makers. Panels made for gaming monitors are priced much higher as compared to those for regular ones. AUO has been able to jack up its profits by adjusting its production lines for making gaming monitor panels when panel prices are under downward pressure. AUO is also strengthening its deployment in 8K and ultra large panel segments in which shipments of 75- and 85-inch panels have been growing fast in 2018. Shipments of high value-added products currently account for over 50% of AUO's total sales, and the company aims to maintain it at over 50% in the long term to sustain its profitability. AUO is focusing technology differentiation, quality optimization and high value-added product portfolios based on three main strategies: 

• Maintaining an optimum production scale, 
• Implementing value transformation and 
• Continuing technology innovation.

Innolux's parent company Foxconn Electronics is attempting to turn itself into a big conglomerate. Sakai SIO International under the Foxconn Group is building a 10.5G line in Guangzhou, China, while Foxconn has unveiled a plan to construct a 6G IZGO panel line in Wisconsin. The Foxconn Group, which also includes display subsidiaries Innolux, Sharp and Century Technology (Shenzhen), is the world's second largest LCD panel maker in terms of production capacity, trailing only BOE Technology but ahead of Samsung Display and LG Display. Leveraging its high production capacity, Foxconn, as a group, is not only competing in niche-type product sectors but also in the commodity market, with the focus on mainstream and non-mainstream products standing at 70:30 or 80:20. Utilizing its established R&D and smart manufacturing capabilities, Innolux is developing value-added, diverse and platform products. The company's recent move to restart the production of TV sets is part of its efforts to optimize the value of its production capacity.

Innolux plans to set up a number of subsidiaries and recent speculation indicate plans to spin off its automotive panel unit and incorporate the unit into Century Technology; and spin off its large-size panel unit for a planned merger with Sakai SIO International. After the reorganization, both Century Technology and Sakai SIO are expected to list in China.