Acer and UMC Join Forces to Dominate the TFT LCD Arena

Acer Display Technology (ADT) has merged with Unipac Optoelectronics Corp. through an equity swap, creating a new company called AU Optronics Corp. (AUOC) to make TFT-LCD display panels.

Unipac is an affiliate of United Microelectronics Corp. (UMC), the world's second-largest chip subcontractor, while ADT is an affiliate of the Acer Group. Present ADT Chairman K.Y. Lee will continue in his role as chairman, only now of AUOC.

The mission of AUOC is to become the world's biggest and best manufacturer of high-quality flat-panel display modules.

The benefits to Acer of the formation of AUOC are as follows:

It will boost our R&D talent pool, enhancing the development and improvement of the relevant technologies within a short time period
It will foster our ability to produce world-class TFT-LCD products
It will help us to achieve our goal of becoming no. 1 or no. 2 in our core business, which includes the TFT-LCD arena

Acer and Unipac will share equal partnership under the new company. The equity swap will consist of one Acer share for 1.17 shares of Unipac. The total capital poured into AUOC is NT$29.7 billion.

AUOC will run five TFT-LCD manufacturing sites, with an estimated output of 170,000 units per month, ranking no. 1 in total shipments among TFT-LCD manufacturers in Japan and Taiwan. AUOC's output level will match that of LG-Philips, trailing only Samsung Electronics Co. of Korea.

All product lines will be expanded as a result of the establishment of AUOC; the number of product lines will rival that of Japan's Sharp. There are currently nine TAB production lines and 25 COG production lines, which together will generate 1 million units of small and medium-sized display panels and 700,000 units of large-sized display panels per month.

AUOC expects to exceed NT$100 billion in revenue within three years.

Acer Group Chairman and CEO Stan Shih, and UMC Chairman Robert Tsao were the key decision-makers in the merger. Both gentlemen hold high expectations for AUOC in light of the strong international reputations that Acer and UMC enjoy. What's more, this undertaking is set to serve as a model for how large companies with strong but different management styles can effectively work together.