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Apr 13, 2018

Beijing time on March 29 news, China touch screen network news, BOE strong rise, innocent and AUO how to deal with? At the beginning of February, the US stocks tumbled triggered major corrections in global stock markets, and Taiwan stocks also followed suit quickly. However, panel AUO and Innotech respectively held a panel discussion. The two companies have paid the best earnings report in 10 years. It has always been regarded as the top four "miserable" businesses, and the stock price is also more than ten yuan. The floating panel industry appears to be turning.

 

According to the results announced by AUO and Innosoft, AUO's EPS after last year was 3.36 yuan per share and Innolux was 3.72 yuan, both the best figures in nearly 10 years, and it also surpassed many 3D Sensing, optical lenses and other stunning subject stocks, if we calculate the ultra-low stock prices of the two companies and estimate the ratio of dividend yields of 6 and 7 percent, the two companies will have a chance to exceed 15% in cash rate this year. It has become the largest industrial share with the highest yield in recent years.

 

Looking back at the past 10 years, the panel industry can be said to have experienced nine deaths. Each company has suffered huge losses and high liabilities. Among them, after the combination of Innosoft and Chi Mei in 2010, the maximum amount of liabilities reached 450 billion yuan, and it has also become the object of the Executive Yuan's order that banks not be able to withdraw money. Today, the panel industry has gone through the gates of ghosts and once it survives so far, leading manufacturers, Innolux and AUO have all found their own ways of running business, and they have started the next stage of competition with companies such as South Korea and China.

 

Samsung dominates China's aggressive progress

Observing the global panel industry's competitive situation, Korean businessmen have mastered their own brands such as TVs and mobile phones. They did not suffer much after the financial tsunami in 2008. As a result, Samsung and LGD continue to expand TFT-LCDs (thin film transistors). LCD panel production capacity will also be heavily invested in AMOLED (Active Organic Light Emitting Display). Now it has mastered more than 90% of the global market share, including Apple's iPhone X and Samsung's most advanced mobile phones, all with AMOLED as the main panel.

 

As for China, which has relied heavily on the supply of Taiwan's panels 10 years ago, it has also started large-scale investment in recent years. It has actively expanded its capacity above the 10th-generation line and is now surpassing the TFT panel to catch up with Korea, becoming the world’s largest producer of capacity.

 

In contrast, due to the poor financial status of Taiwanese companies with significant losses from 2009 to 2012, they can only significantly reduce their capital expenditures and reduce depreciation and amortization over the past three years. The annual depreciation and amortization of Innolux and AUO totals between RMB 70 billion and RMB 100 billion. Between the yuan, but in the past five years has been significantly reduced, which AUO has been reduced to several billion to 10 billion yuan; innocent number is slightly higher, at most are also between 34 billion yuan.

 

After 2013, Innolux, AUO's profitability and financial figures were stable, and there was still only a small increase in capital expenditure. The emphasis was placed on value enhancement and differentiation. Not only did the list of losing money fail, but it no longer played hard on the scale of production capacity. Optimized product portfolio to produce high value-added and cost-effective products, from the panel provider to the display solution factory.

 

Strategic Transformation Going out of its Way

Through this strategy of "pursuing value and not producing capacity," panel tigers have gradually come out of their own way in recent years. Taking the product mix as an example, in the past, the proportion of products in the panel industry was almost the largest in terms of televisions, laptops, and monitors. These were almost standard products with little difference in specifications, and the profits were very thin; With the expansion of industrial control, automotive and consumer electronics, the proportion of these value-added panels has increased significantly.

 

According to the product mix ratio of AUO last year, the overall value-added panel revenue accounted for 50%, and it is hoped to continue to grow in the future. Due to the increase in the proportion of value-added panels, the gross profit margin of the Panel Tigers has gradually increased from the early negative numbers to single digits, and it can be raised to about 10% last year. It also made both tigers hit the highest EPS levels in the last year. Best number.

 

For the new capital expenditures, the two companies are preoccupied with each other, so be sure to spend every penny on the knife. In the case of AUO, Peng Shuanglang, Chairman of AUO, bluntly stated that investment in the 10.5-generation plant and AMOLED plant is now heating up and the Chinese industry is actively investing. However, the capital recovery rate of these new plants is low, and it is difficult to see results in the short term.

 

AUO needs to increase its capital turnover rate and increase its high-quality production capacity. It will not easily increase capital expenditures without orders. For example, Kunshan LTPS (low-temperature polysilicon) panel plant will be fully loaded at the end of the third quarter of last year and will maintain full production this year. In addition, it will also take part in the second half of the year. There are also 8.5 new production lines in operation, and the production capacity is now fully loaded.

 

Peng Shuanglang said that AUO's technological innovation is more important than the increase in production capacity, such as the new TV 8K panel. This year's CES (Consumer Electronics Show) major brands of 85 吋 8K TVs are using AUO's panel, and will also expand the LTPS platform. In addition to the 18:9 full-screen mobile phone, the application will be extended to high. Orders for laptops, cars, in-flight entertainment systems, etc., are expected to be gradually volume production this year.

 

In addition, in research and development of the latest technology, dual-Tiger in the popular Micro LED, Mini LED, are also invested in R & D resources. Taking Innolux as an example, the Mini LED has been published at this year's CES exhibition and has started cooperation with depots. It is estimated that it will be able to produce goods within two years. As the automotive industry is a long-term cooperation order, it is estimated that it will be stable for at least 5 years. growing up. Infineon’s executive vice president Ding Jinglong said, “Taiwan has not kept pace with the investment in AMOLED panels. Now it is too late, but if we can successfully develop the Mini LED and Micro LED, we will have the opportunity to send AMOLED panels to the refrigerator in the future. ”

 

Looking forward, the panel tigers will gradually develop their own characteristics. AUO’s development orientation focuses on the pursuit of value-added in commodities. In addition to the front panel, AUO also provides a total solution for software and hardware integration to enhance the unique value of hardware through software applications.

 

Peng Shuanglang said that for example, 4K panels will account for more than half of the total TV panel shipments this year. The 18:9 full-screen panel will also be equipped with special-shaped cutting, In-Cell touch control, and other commercial panels such as automotive and industrial control. Will increase resources and increase the proportion of revenue.

 

As for the Innolux group, Hon Hai, chairman of Honghai Group, rushed into the upstream panel industry, including Guangzhou's 10.5 generation line and the US panel factory. Together with the Japanese summer plant, the Hon Hai Group could become a company within five years. Beyond Korean panel leader. In the future, Hon Hai Group will build a panel kingdom and wait until the output of panel components expands, and it is imperative to expand downstream outlets. Innolux is expected to play a more critical role in the shipment of complete systems.

 

The bottom is still rising

Xiao Zhihong, general manager of Innolux, predicts that Innolux will turn to a one-stop vertical integration of the entire machine. It is expected that the monthly production capacity will increase from more than 100,000 units at the beginning of the year to 500,000 units at the end of the year. With the maturity of the Internet of Things, Innolux has become the overall service provider of the system, providing overall services such as PID (Public Message Display Solution), large-scale video walls, and conference systems.

 

In addition, Innolux has been actively investing in automation in recent years. Its employees have cut 30,000 employees from the highest 130,000 employees to the industry. With the automation of production automation, it has now fallen to more than 50,000.

 

However, the biggest pressure test for the panel industry this year is obviously the active expansion of factories from China. Last year, China's TV panel shipments reached 94.7 million units, accounting for 36.1% of the world's total, surpassing Vietnam and South Korea to become the world's largest; this year, BOE 10.5 and CPI's 8.6th generation will be added in volume production. How will the supply and demand of panels change? It is also an important factor in the operation of the Dual Tigers on the observation panel this year.

 

Because of this, even if the stock price/net ratio of the two companies is between 0.5 and 0.6 times, and the interest rate is expected to exceed 15% this year, but for the future performance outlook of Innolux and AUO, there are not many foreign investors The average investor still stays in the past "misfortune" impression. Can the panel tigers "turn over" this? Still have time to verify.


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