Innolux shares soar after TSMC deal; Micron reportedly eyes AUO plants

Taipei, Aug. 26 (CNA) Shares of Innolux Corp., a leading flat panel maker in Taiwan, rose sharply Monday morning in the wake of a deal in which the company will dispose of a facility and equipment to contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC).

TSMC and U.S.-based dynamic random access memory (DRAM) chip maker Micron Technology Inc. had reportedly competed for the Innolux 5.5th-generation facility located in the Southern Taiwan Science Park. After the deal between TSMC and Innolux, Micron is said to have set its sights on two facilities in Tainan owned by AUO Corp., another major Taiwanese flat screen maker.

As of 11:51 a.m., shares of Innolux had risen 10 percent, the maximum daily increase, to NT$16.65 (US$0.52) with 72.36 million shares changing hands.

Shares of AUO also gained 0.89 percent to NT$17.05 on the Taiwan Stock Exchange, where the Taiex had risen 0.47 percent to 22,262.97.

The deal between Innolux and TSMC was announced on Aug. 15 but trading of Innolux shares had been suspended until Monday as a capital reduction was being implemented to strengthen its capital structure.

Strong buying in Innolux emerged soon after its trading resumed Monday.

In the deal, TSMC will spend NT$17.14 billion (US$539 million) to purchase the plant -- with a floor area of about 317,445 square meters -- and equipment from Innolux to help meet its needs for day-to-day operations.

Analysts said the purchase was to help expand the capacity of the advanced 3D Chip-on-Wafer-on-Substrate (CoWoS) IC packaging services used in artificial intelligence (AI) chips.

In addition to CoWoS, TSMC said that the company is developing Fan-out Panel Level Packaging (FOPLP) integrated circuit packaging technology, which is more advanced than standard wafer-level packaging (WLP).

Analysts said they did not rule out TSMC teaming up with Innolux in developing FOPLP technology, citing industrial sources as saying that the chipmaker's research and development team has met with the flat panel supplier's R&D personnel.

Innolux said the sale of the facility to TSMC is estimated to rake in about NT$14.7 billion in profit. Analysts said the transaction is expected to boost Innolux's earnings per share by NT$1.62 this year.

As for Micron, the U.S. memory chip maker is expected to purchase two facilities owned by AUO in Tainan to expand its advanced IC packaging and testing services and High Bandwidth Memory (HMB) production.

According to market estimates, the purchases of the two facilities from AUO are expected to cost Micron NT$10 billion to NT$20 billion.

In response to market speculation of a possible deal with Micron, AUO declined to comment on a specific case but said the company has adjusted its production in its complex in Tainan and will optimize use of its facilities.

However, local news media reported recently that the two AUO facilities were closed in August 2023 and the flat panel maker is seeking to dispose of the facilities.

In terms of capital reduction, Innolux's paid-in capital was reduced by NT$10.8 billion, or 12 percent, by canceling about 1.089 billion shares and giving NT$1.2 in cash for each share held by shareholders.