Expansion—Concentration

Key Thoughtz

• Chi Mei Optoelectronics over-extended itself while realizing diminishing returns to scale and fell into the credit crisis.
• Merging with Innolux Displays improves its access to customers but not its market position in TV panels.
• Realignment of CMO capacity with Hon Hai Group interests may force smaller competitors into small-panel markets.

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Abstract — The immanent merger of Chi Mei Optoelectronics (CMO) with Innolux Display (ILX) may have a greater effect on small display markets than on large display markets. CMO expanded too fast and succumbed to the credit crisis. ILX concentrated on monitor panels and forward integrated into OEM monitors. As a result, the combination of Chimei Innolux will have a weak position in TV panels but a stronger position in PC panels.

Customers and Producer Concentration

Source: BizWitz analysis.

The combination may benefit Nokia more than other customers, however. Nokia has relied on a panel supplier that recently merged into Innolux Displays and Chi Mei Optoelectronics brings additional technology to the mix that could give Nokia a viable alternative to sourcing panels from Samsung Mobile Display Systems, an affiliate of its handset competitor, Samsung Electronics. A sustained relationship with Nokia and a stronger presence in monitor panels may force smaller Taiwanese rivals into niche markets. For more insight, download Expansion—Contraction.