This analyst opinion piece describes Innolux’s spinoff plans aimed at strengthening its strategic movement to transform into a Tier 1 company. Meanwhile, wholly-owned CarUX Technology will oversee Innolux’s automotive display business.
Key findings
- Innolux plans to spin off its automotive display business by the end of 2020. The COVID-19 outbreak could delay the schedule; however, the spinoff is still ongoing.
- The business spinoff is expected to strengthen its strategic movement to transform into a Tier 1 company. CarUX Technology, which is wholly owned by Innolux, will oversee Innolux’s automotive display business. In March 2020, the backend module capacity was moved to CarUX Technology. Innolux will still continue with fab production, while CarUX will handle the backend facilities, research and development (R&D), sales, and customer-related affairs.
- Besides the business unit consolidation, Innolux is also merging the automotive display panel production line and planning for the restructuring of small fabs. Fab 1 could close in 2021. Additionally, automotive production will move to Fab 3, while smartphone displays produced at Fab 3 will move to T2.
Innolux used to have several business units for conducting automotive business. In September 2019, the company built an Automotive and Aviation business unit (BU) and consolidated all automotive-related business into this BU. The purpose of the business consolidation was to reduce the internal business conflict and to prepare for a business spinoff from Innolux, just like InnoCare.
In March 2020, automotive display module lines were moved to CarUX Technology, a wholly owned company of Innolux Display. The business spinoff is expected to happen by the end of 2020. However, COVID-19 could delay the schedule.
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In 2019, the company targeted shipments of around 12 million units for global (mainly American and European) customers and 6.5 million units for Chinese and other Asian customers. However, the weak light vehicle sales of its major customers, especially GM, hampered its business and the shipments were only 10.6 million units. As a result of the organization restructuring and strong competition from BOE, Innolux’s Chinese business was less than expected and shipments were only 5.9 million units. The whole year, thus, declined.
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The current outlook of its 2020 growth now is negative. The global accounts will keep growing from around 11.5 million, but its Chinese business will drop to around 3.5 million units. The total shipments will decline again.
The COVID-19 pandemic is anticipated to significantly impact Innolux’s major customers’ demand, especially from GM and BMW. Further business target reduction is predicted.
Innolux is planning to restructure its small fabs. Fab 1 could close in 2021. Additionally, automotive production will move to Fab 3, while smartphone displays produced at Fab3 will move to T2.
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