Thanks to the soaring demand stimulated by the stay-at-home economy and supply constraints of glass substrates, ICs and other components during the COVID-19 pandemic, panel prices have started to take off since June 2020, enabling panel manufacturers AUO and Innolux to turn losses into gains.

However, panel prices have been dropping since August 2021 following vaccination spikes and slowdowns in component supply gaps, signifying the unpredictability of panel business cycles. To be more recession resilient, AUO and Innolux have been striving for value transformation.

AUO launches the Dual Axis Transformation+1 project, aiming for stable earnings in the long run

In an attempt to maintain recession resilience and long-term profitability, AUO aspires to encourage a more reasonable evaluation of the panel industry. In early 2021, the Taiwanese panel vendor launched the Dual Axis Transformation (Go Premium and Go Vertical strategies) + 1 (Smart Investment 2.0) project.

Paul SL Peng, chairperson of AUO, specified that the Go Premium strategy is aimed at redirecting the company to value-added business. Currently, up to 90% of AUO’s revenues come from the conventional panel and solar energy sectors. In order to develop products with higher value, AUO will smartly utilize its unrivalled expertise and production capacity. For example, the previously released 8K TVs, frameless TVs, gaming panels and Mini/Micro LED displays all have demonstrated the company’s industry-leading technologies.

▲ AUO chairperson Paul SL Peng announces the Dual Axis Transformation+1 project (photo credit: TechNews)

During the smart display exhibition Touch Taiwan 2021, AUO presented the cutting-edge ALED display technology in advanced Micro LED applications for home entertainment and vehicle mounted display. The display technology is also suitable for indoor and outdoor display in ultra-large retail stores, fine-pitch LED display solutions in exhibition spaces, novel eye protection applications and all-round hardware–software integration solutions for smart retail. The company exemplified the incorporation of display technologies into AIoT with innovative applications in various fields, leading to the construction of an industry ecosystem.

The Go Vertical strategy focuses on developing systems and one-stop services based on display business and vertical-sector solutions, thereby maximizing panel value. Additionally, AUO’s subsidiary AUO Display Plus completed division from its parent company on January 1 with the hope of establishing strategic partnerships with greater flexibility. Therefore, AUO Display Plus can create ecosystems for business, transportation, industrial, medical and educational purposes and seize digital opportunities by using AIoT technologies.

As for Smart Investment 2.0, Mr. Peng revealed that instead of making heavy investments in large-scale capacity expansion, AUO decided to expand specific production capacity and expertise so as to develop products with mid-to-high value. By continuing to make high-quality investments in productivity upgrades, AUO will center on expanding its business to the “4+1 sectors”, namely smart transportation, retail, healthcare, entertainment and smart manufacturing. Through strategic investments and many other approaches, the long-standing panel manufacturer intends to diversify its business to different fields and reduce the percentage of panel sales from total revenue.

▲ AUO’s subsidiary AUO Display Plus showcases advanced medical imaging solutions (photo credit: TechNews)

For example, its subsidiary AUO Display Plus partnered with healthcare businesses to, by integrating AI and IoT technologies, develop advanced medical imaging solutions for smart surgery, medical testing and medical management (e.g., a 55-inch 4K UHD medical display and 3D medical imaging solutions), endeavoring to expand value-added applications for smart healthcare.

Further, AUO has partnered with upstream and downstream suppliers to create more comprehensive solutions for smart integration and display applications. In November 2021, AUO teamed up with ADLINK to promote edge visualization in smart healthcare, transportation, manufacturing and enterprise applications. With each other’s technical and market strengths, the two firms can achieve cross-field collaboration, develop overall solutions, co-create industry ecosystems and accelerate decision-making at the edge.

▲ AUO partners with ADLINK to create edge visualization ecosystems (photo credit: AUO)

Innolux strives to maximize profits with transformation and re-engineering strategies

Innolux also strives for transformation. Embracing the concept of “Transformation, Re-engineering, Value-Added,” Innolux works hard to strengthen its long-term competitiveness and financial structure. In the coming years, the company will continue adjusting operational strategies, advancing new technologies, expanding new application areas, enhancing added value of products, developing advanced products and entering emerging markets. By largely improving technologies and product quality, Innolux is set to maximize profits for itself, its shareholders, customers and business partners.

▲ Innolux strengthens operations through transformation and re-engineering (photo credit: Innolux)

By adopting the “Transformation, Re-engineering, Value-Added” strategy, Innolux has managed to develop various cutting-edge products, systems and services, upgrade product specs and improve smart manufacturing last year. Targeting at smart education and entertainment markets, the display maker showcased various advanced Mini LED gaming monitors at Touch Taiwan 2021, including a 16-inch frameless panel with Mini LED backlights and WQXGA resolution for gaming notebooks.

Additionally, Innolux has made progress in Micro LED development. The firm exhibited its first 92.4-inch 4K Micro LED display driven by QD and AM technologies with a pixel pitch of P0.6mm. The display has overcome technology challenges facing LCD, OLED, and fine-pitch LED screens and features perception of 3D depth, wide gamut, ultra-high contrast, smooth HDR, retina-grade image quality and availability for large-scale seamless tiling. The display is aimed at the large-sized display markets including the 8K theater, Esports stadium, large security control room, digital museum and high-end consumer markets.

▲ Innolux’s Mini LED-backlit display targets at high-end automotive markets (photo credit: Innolux)

Innolux achieved several outcomes in the non-display sector as well. The panel supplier plans to dominate the high-end automotive display market with its large all-in-one automotive panels. With unique know-how, the firm has entered supply chains among leading brands worldwide. By incorporating it with Mini LED backlight display technologies, Innolux developed large all-in-one panels to create immersive experiences for luxury and flagship vehicle drivers. To seek market differentiation, the company centers on meeting the demand for integration of smart cabins with digitalized information, which represents growth opportunities for panels with high added value as well as business opportunities for high-end automotive applications.

James Yang, president of Innolux, said that demand for automotive panels of 20 inches or larger in size will soar and that he hopes Innolux will become the top supplier of large automotive panels in 2023.

In response to the thriving AI, IoT and 5G technologies, Innolux conducted cross-field research to develop LC (liquid crystal) meta-surface antennas, aiming at the aerospace-grade antenna market. Meanwhile, the manufacturer has developed medical device applications and become the world’s top supplier of x-ray flat-panel detectors, enabling itself to enter new markets with enhanced business value. According to Yang, Innolux strives for double-digit growth in the non-display sector by 2024.

▲ Through cross-field research, Innolux unveils LC meta-surface antenna products (photo credit: Innolux)

In addition to its efforts to develop innovative display technologies and diverse applications, Innolux intends to develop packaging applications with panel-level process for advanced semiconductors. While endeavoring to establish strategic partnerships with major customers globally, Innolux has co-developed fan-out panel-level packaging solutions with other upstream-downstream suppliers of materials and equipment for FEOL (front-end-of-line) interconnect layers.

It is worth observing AUO’s and Innolux’s transformation tactics against business cycle fluctuations

To sum up, the COVID-19 pandemic gave rise to the stay-at-home economy, which in turn accelerated the transformation of AUO and Innolux. The two has announced panel products with advanced specs, great quality and cutting-edge technologies. Additionally, they have provided smart solutions for various sectors including healthcare, retail, energy and transportation, aiming to turn themselves from pure panel manufacturers into suppliers of integrated solutions for smart systems.

In the face of price fluctuations and worries about oversupply due to productivity increases in 2022 across the panel industry, AUO and Innolux must carry out transformations by adjusting their product portfolios and business models, more quickly increase business added value and ensure long-term profitability. In this way, the two leading panel manufacturers can become resistant to economic recession in the industry and stop being called “stocks prone to business cycle swings” and members of “the sunset industry”. Whether they will succeed is worth further investigation.

(Article source: TechNews; first image credit: TechNews)