No 10G AUO Plant in China

We noted earlier this month the Taiwanese government is allowing more and more manufacturing technologies to be imported to China which, according to them, will help Taiwanese firms remain competitive.

In Will Taiwan LCD Makers Move to China? we observed the laws surrounding LCD panels were being loosened and more opportunity for Taiwnese firms to invest in China were being opened. We also argued in Mr. Ma please don't move the fabs to China and China Strategy for Fabless Chip Designers that Taiwnese firms should be careful not to import too much technology into China as there is a lack of intellectual property rights protection. We observed this lack of protection in Hon Hai Fights in Shenzhen where Chinese courts are delaying proceedings brought by Hon Hai against their competitor in South China. This lack of action by the Chinese legal system allows the Chinese companies to become more competitive. However, in China Strategy for Fabless Chip Designers we also speculated the lack of partnerships between Taiwan fabless design houses and their Chinese counterparts was perhaps due to this lack of trust.

When I commented to a friend of mine that I thought the government was wrong to lift restricitions on imported technologies, he pointed out that although the legal restrictions were being eliminated, the business decisions were still in the domain of the companies, not the government! We agree! This certainly seems to be the case for AU Optoelectronics (AUO).

AU Optoelectronics (AUO) has made the decision not to invest in 10G fabs in China, even though the government may allow them to. Right now AUO are looking for land in Taiwan to build their newest 10G fab. Rebecca Kao at Digitimes writes:

AU Optronics (AUO) will not build its 10G plant in China although the Taiwan government is considering allowing the island's LCD panel makers to set up front-end production lines in China, according to AUO president LJ Chen.

Taiwan has a strong cluster of players in the LCD panel industry, enabled by abundant talent, rich resources, sound infrastructure, and advanced technologies, Chen said. With the panel industry growing fast in Taiwan, it will be impossible for AUO to consider China as the site for the 10G project the company is planning, he added.

AUO has been looking for land in Taiwan for its 10G project. Taiwan is considering lifting a ban on LCD panel makers setting up front-end production in China, although the latest speculations have been that the government may only allow makers to run 6G and lower-generation lines.
Chen commented that relaxing the ban will benefit the development of the panel industry in the long run, but the government will still need to assess a host of issues, such as the extent of the relaxation, timing, capex, supply chain, China's competitiveness, and import taxes. The most important factor is demand in the market, he added.

For example, Chen said, if China imposes taxes on imported LCD TV panels, Taiwan makers may then consider operating front-end production in China. But there are a lot of factors that panel makers cannot handle alone, and therefore careful evaluations must be done before running panel lines in China, he said.

Chen said AUO does not see any need to set up lower-generation lines in China for the time-being.

The decision for Taiwanese firms to invest in China will always be a business decision. Not a political one. Sure enough, the Chinese government can create an attractive investment environment and indeed seem to be doing so as we noted in Attracting Taiwan, and the Taiwanese government may lift restrictions, but the decision will always be made by the management teams, not the governments. China and the Chinese government must understand, for high-tech firms to be willing to put their latest technologies into China, they must be assured their intellectual property rights will be protected. If not, only older technologies will land on their shores.

Digitimes: AUO will not build 10G line in China