Who Will Be CPT’s Strategic Investor?

By David Hsieh – Vice President, Greater China Market, DisplaySearch

CPT and its agents plan to issue Global Depository Receipts (GDRs) for 2.5 billion or more shares of the company in the near future. Pricing has not been set, but this implies that CPT, a second-tier TFT LCD manufacturer in Taiwan, will obtain a new strategic investor to strengthen the company’s financial situation. CPT’s finances have been suffering since panel prices fell sharply in 2H’08 and early 2009. The identity of CPT’s strategic investor has important implications for the TFT LCD industry. DisplaySearch would like to share its perspective on potential candidates:

Compal is the second largest notebook PC a OEM/ODM (contract manufacturer) in the world and also manufactures LCD monitors, mobile phones and LCD TVs. So Compal has reasons to secure a long-term stable LCD panel source., but panels are mostly consigned for OEM/ODMs, which means they do not have a say in the choice of panels.
Foxconn defines itself as a system integrator. Although the company has an internal TFT LCD panel supply from its subsidiary Innolux, panel supply is a key factor for Foxconn/Innolux in the OEM/ODM market. Foxconn has a history of strategically buying companies to gain capacity, technology and know-how that it needs, and the company is famous for its strong financial position.
Wistron is another dominant notebook, monitor, and TV system integrator in Taiwan. It’s possible that Wistron would like take the same approach as Compal, trying to secure a stable supply of panels.
As an LCD TV producer, Funai‘s business model is to buy LCD cells (semi-finished panels) and then assemble its own backlight units and LCD modules. This model is helpful for the company to be competitive in LCD TV system costs, but the critical issue is acquiring the cells it needs. Considering revenues and access to the end market, not all panel makers are interested in supplying cells. CPT has a record of supplying cells to Funai, and Funai has invested in panel suppliers before. This could be a good reason for Funai to strategically invest in CPT.
Chinese TV companies seem like logical possibilities, but the Taiwan government has not lifted the ban on Chinese investments in Taiwanese TFT LCD suppliers.