Chi Mei Optoelectronics (CMO) and Innolux to Merge

Merge Chi Mei Optoelectronics (CMO) and Innolux will merge and form Taiwan’s largest LCD manufacturing company, displacing AU Optronics (AUO) from the top. Innolux is a subsidiary of Foxconn Electronics, the marketing name for Hon Hai Precision Industry.

Competitive Advantage CMO will receive one Innolux share for every 2.05 shares of CMO common stock. The merger will be completed by May 1, 2010 and the new merged company will keep the Innolux name. (It seems the name might actually be Chimei Innolux.) The merger will take advantage of resource integration, reduction of operating costs, and expansion of business scale. By integrating significant LCD panel production with its integrating capabilities Innolux will be better equipped to compete against leaders such as Samsung, LG Display, Panasonic, AUO and Sharp.

LCD TV Market Penetration CMO is Taiwan’s second largest LCD manufacturer and has the fourth largest LCD panel manufacturing capacity in the world. Innolux, though not a powerhouse in terms of LCD panel manufacturing, takes advantage of the enormous size and resources of its parent company Foxconn and has developed its LCD integration business, especially for LCD monitors, making it the second largest LCD monitor maker in Taiwan behind TPV. With CMO, Innolux will be able to penetrate the LCD TV market by utilizing CMO’s large LCD TV panel production capabilities. Innolux expects to ship 4-6 million LCD TVs in 2010.

Impact on CPT & HannStar Chunghwa Picture Tubes (CPT) and HannStar Display are two much smaller players in the LCD panel manufacturing industry in Taiwan. Innolux (or Chimei Innolux) and AUO will be 600-pound gorillas that will be eminently more capable in supplying very large LCD panels, especially for the LCD TV market. CPT will have a negative impact from the merger as the company supplied open-cell LCD panels to Innolux. Post-merger, Innolux will not be requiring those open-cell panels from CPT anymore. CPT has begun concentrating on small/medium-sized LD panels, transforming its G4.5 TFT LCD fabs toward smaller sizes. HannStar is also shifting its focus to smaller LCD sizes: its G5.3 fabs will be focusing more on small/medium panels. But the shift in focus to small/medium LCD manufacturing has been happening since way before the Innolux-CMO merger. It is also questionable as to whether smaller companies like CPT and HannStar can compete in the long-run. Large companies have more leverage when procuring components and will be more cost competitive. Companies such as Sharp, LG Display and Samsung have been developing their capabilities to manufacture high-quality small/medium panels especially for smartphones and are aggressively moving toward OLED.


  • “Innolux and CMO to merge; Foxconn strengthens its LCD TV hand” – DigiTimes
  • “CMO-Innolux merger to revamp supply chain, say Taiwan equipment makers” – DigiTimes
  • “Innolux-CMO merger likely to send CPT, HannStar focusing more on small- to medium-size LCD panel market” – DigiTimes

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