Taiwan’s largest LCD manufacturer AU Optronics (AUO) will be looking carefully at the LCD market for the next two to three months to decide whether or not to invest US$3 billion in a G8.5 TFT LCD fab. AUO already has the land where the massive manufacturing plant will be built. If AUO decides to go ahead and invest in a G8.5 fab operations will commence some time in 2011. According to Andrew Tang, assistant vice president of Taiwan International Securities, AUO is considering the investment to meet the demand for LCD TV panels from China and to improve its competitiveness. Samsung and LG Display, the top LCD producers, already have G8 plants.
In my opinion, AUO will need to borrow heavily since the company is expecting to return to profitability in the second half of this year. And that expectation is based on two conditions: continued strong demand for LCD TV panels from China and a rebound in demand from North America and Western Europe. China’s LCD TV panel demand will continue but I am not so sure that there will be a strong rebound in demand for LCD TV sets in North America and Western Europe. I do expect LCD demand from North America to begin growing at the end of summer at the end of August thanks to back-to-school sales of notebook PCs and monitors in addition to the overall economy starting to grow again.