China-based touch panel maker Holitech Technology reportedly will raise funds to acquire Each Opto Electronics Industrial, BYD's electronics component department, and Pingbo Electronics, all makers of touch panel-related components. Digitimes Research believes the acquisitions will raise Holitech's position in the industry and boost its touch panel shipments to help it become the second-largest supplier in China as the acquired businesses will complement Holitech's weaknesses.
The acquisitions may also allow Holitech to copy other China first-tier touch panel makers' business models and start developing high gross margin products such as fingerprint sensors and camera modules.
Holitech's main business is entry-level touch panel production and after listing on the Shenzhen Stock Exchange in November 2013, the maker has seen its position in the industry rising. The company is therefore is aggressively raising money via the stock market to fund acquisitions.
Holitech's main clients are China's white-box solution providers meaning the company only has indirect partnerships with China's smartphone brand vendors. Its plants are located mainly in Ji'an of Jiangxi Province, which compared to Shenzhen, has advantages over labor costs, allowing Holitech to become one of the top performers in terms of operating profits in China's touch panel industry.
With the acquisitions, Holitech mainly aims to complement its product lines. Compared to Holitech, which mainly focuses on white-box clients, Each Opto's clients are mostly bigger players such as TCL, CoolPad and BBK. TCL is an especially important client as Each Opto currently supplies about 40% of the vendor's overall touch panel demand.
Each Opto is also partnered with Taiwan-based Young Fast to develop high-end touchscreen technologies such as ultra-thin and slim bezel devices, which are abilities that Holitech lacks.
With BYD having turned its focus to automobile and battery-related product lines, its electronics component business has grown less important and therefore BYD has decided to post it for sale.
BYD's electronics component business includes touch panel and LCD module businesses, which are both existing product lines of Holitech, but the business' camera module product line is what has attracted Holitech to an acquisition since the component is still seeing growing demand and has strong potential for further development.
China's first-tier touch panel makers O-Film and Truly both have camera module capacities enabling them bundle sales with touch panels in order to earn extra income as well as attract brand vendors to place orders.
Since Holitech has already successfully boosted its touch panel shipments by bundling its LCD modules with the shipments, the company is expected to further improve its performance, if it is able to acquire a camera module business to expand its bundling services.
Pingbo, located in Dongguan, China mainly manufactures GG-type touch panels, which are considered a lower-end specification product compared to other touch panel technologies. Pingbo supplies its touch panels mainly to China brand vendors such as Hisense.
Holitech's tablet touch panels only account for 10% of its overall shipments and the company has entered the supply chain of Acer's tablets and recently expanded into the supply chains of Quanta Computer and Foxconn Electronics' (Hon Hai Precision Industry) to ship touch panels for their white-box tablet products.
For 2015, in addition to keeping its existing customers, Holitech is also looking to recruit new clients; therefore, the company will need to dramatically increase its shipments in order to satisfy related demand. Acquiring Pingbo is expected to help resolve this issue.
Upon entering 2015, the touch panel industry's reshuffling did not end after Wintek's financial reforms. Digitimes Research believes more China touch panel makers will choose to quit the industry due to difficulties raising funds from the capital market and the fact that profits are growing thinner.
As a result, listed touch panel makers acquiring non-listed competitors to strengthen their competitiveness and industry positions as well as secure supply chains will continue.