With the consumer electronics market approaching saturation, panel manufacturers from Taiwan and China are seeking new avenues for growth. Firms like BOE and Innolux are shifting toward advanced packaging technologies to navigate the challenges in their industry.
This transition is part of a strategy to mitigate the cyclical impacts of LCD production while seeking growth momentum over the next decade.
From panel to packaging
The market for mass consumer electronics—smartphones, monitors, notebooks, and TVs—has reached its limits, with minimal room for significant expansion. Furthermore, emerging technologies and industry structural shifts have led to dwindling demand.
Historically, panel manufacturers largely focused on chasing orders for mass products, but as China gains dominance in the global panel industry, there has been a shift toward exploring niche display applications. Manufacturers are now targeting automotive and system-end markets, and even eyeing entries into non-display sectors.
Innolux, for example, has been actively developing non-display businesses in recent years. Subsidiaries like InnoCare are advancing X-ray sensor technology, and CarUX is focusing on system integration for the automotive market. Furthermore, fan-out panel-level packaging (FOPLP) has played a pivotal role in Innolux's transformation efforts.
Innolux's FOPLP strategy is progressing, with chip-first production expected to commence by the end of 2024 and revenue contributions likely in the first quarter of 2025. Redistribution layer (RDL)-first production capacity is already established and undergoing validation, with hopes of mass production in the next one to two years.
TGV packaging is expected to reach clear production capacity and revenue contribution in two to three years.
Innolux regards FOPLP as a key component of its transformation. It sold its 5.5-generation LCD factory in the Southern Taiwan Science Park to TSMC, sparking speculation that Innolux aims to leverage this connection to collaborate with TSMC on FOPLP, opening new semiconductor business opportunities.
In contrast, AU Optronics (AUO) is not prioritizing FOPLP but is instead focusing on its three main pillars of future operations: "Mobility Solutions," "Vertical Solutions," and "Display Technology," to transform into a solutions company centered on display technology.
AUO's decision not to aggressively pursue FOPLP is due to two main factors. First, in terms of market value, board chairman Paul Peng stated that traditional FOPLP, which mainly produces power ICs, offers low prices and low added value, which does not align with AUO's current development strategy.
Second, AUO considers the competitive and cooperative dynamics in the FOPLP space to be complex, as multiple companies in Taiwan and South Korea are already developing the technology, leading to highly competitive risks when collaborating with OSAT providers.
While AUO has not ruled out FOPLP entirely, it remains cautious. The company notes that panel makers may have an advantage in glass processing as FOPLP begins using glass substrates. AUO is keeping an eye on whether FOPLP will become a mainstream technology and may advance it when the timing is right.
Aside from Innolux's factory sale to TSMC, AUO has also sold three factories in Tainan and parts of its Taichung Houlai facilities under AUO Crystal to memory chip giant Micron for NT$8.1 billion (US$254 million).
Following the transaction, AUO emphasized that the deal "opens up more opportunities for future cooperation" between the two companies, though the specifics of these collaborations remain undisclosed, leaving room for speculation.
In addition to selling factories, AUO has also joined the SEMI Silicon Photonics Alliance, alongside other industry giants like TSMC and ASE, as well as MediaTek and Foxconn. AUO stated that it hopes to share insights on technology trends and market dynamics through the alliance, accelerating technological breakthroughs and expanding market opportunities to enhance the industry's competitiveness.
Though AUO's entry into the semiconductor industry is less clear, its subsidiaries in the smart space and energy sectors have won a considerable number of net-zero orders from semiconductor companies. Furthermore, AUO's investment in Daxin Materials has shown promising results, with semiconductor materials revenue expected to reach 10% by the second half of the year.
The company is also in the validation process for 2-nanometer and CoWoS materials.
BOE's pivot
Chinese panel makers are also vying for entry into the semiconductor sector. Beijing Oriental Electronics (BOE) recently unveiled a panel-level packaging substrate made of glass during BOE IPC 2024, becoming the first Chinese company to pivot from panel manufacturing to advanced packaging.
Reportedly BOE's 2024–2032 glass substrate roadmap aims to achieve mass production of substrates with an aspect ratio of 20:1, 8/8µm spacing, and a packaging size of 110x110mm by 2027. By 2029, it hopes to enhance these specifications to 5/5µm spacing and a packaging size of 120x120mm.
BOE has adopted a standard 510x515mm glass core board and substrate for packaging, featuring a 50x50mm packaging size and an 8-layer design (2+3+3) that offers high strength and low warpage. This panel-level substrate primarily targets AI chip applications, with mass production scheduled to begin after 2026.
BOE has been quietly expanding its chip capabilities for some time. As early as 2017, the company invested in the China-based subsidiary of the Taiwanese chip packaging firm Chipbond.
BOE's related investment funds have also heavily invested in semiconductor materials, equipment, and manufacturing companies. Additionally, BOE has formed a partnership with Huawei to develop panel-level packaging technology.
The panel industry's challenges
The panel industry is highly susceptible to demand fluctuations, leading to sharp business swings between profits and losses. Intense competition has driven panel prices to unprofitable levels.
Despite manufacturers in Japan, Korea, and Taiwan shutting down production lines and China scaling back production, it remains challenging to overcome excess capacity.
In this situation, panel manufacturers are compelled to seek alternative growth drivers to overcome industry challenges. However, not only does the competitive landscape in semiconductors differ greatly from that of panels, but chip packaging technology itself is also quite complex.
Although some panel and semiconductor manufacturing processes are similar, the two industries have distinct markets and ecosystems, making them worlds apart. Whether panel manufacturers can successfully break into the semiconductor industry and secure strategic importance remains to be seen.
