TPK joins hands with OFILM to seize the Apple market

Source: Content from United Daily News ,Thanks.

TPK-KY announced yesterday that it will form a strategic alliance with OFILM, the leading touch panel manufacturer in China. The two companies will invest in each other, cross-hold shares, and establish a new joint venture to develop in the direction of automotive touch panels. In the future, they will jointly take orders and expand the touch panel market, which may have an impact on other touch panel manufacturers.

TPK CFO Liu Shiliang said yesterday that OFILM will participate in the subscription of 20 million private placement common shares issued by TPK at a price of NT$9.105 per share, which was TPK's closing price yesterday. The total investment amount is 1.81 billion yuan. OFILM will hold approximately 5.46% of TPK's equity in the future.

As for TPK, it will participate in OFILM's private placement or directly purchase shares in the open market at a price not higher than RMB 40.34 per share within one year after the two parties signed the share subscription agreement yesterday, and acquire OFILM's shares with a total amount not exceeding RMB 204 million. In the future, TPK will hold approximately 0.4% to 0.5% of OFILM's shares.

He pointed out that TPK is a foreign-funded company, and mainland factories investing in TPK do not need to obtain approval from the Taiwan Investment Commission. As for OFILM, it is a mainland company and must obtain approval from the mainland government, which is expected to be completed within one month.

Liu Shiliang said that OFILM's advantage is plastic film touch technology, while TPK's advantage is glass touch technology and high-precision back-end lamination services. The two sides can work together to provide customers with a one-stop shopping all-round solution. He said that both sides will uphold the spirit of independent operation and fair competition, and expand the market together in a good-faith cooperation. As for the newly established joint venture, Liu Shiliang said that the operating details have not yet been determined. In the future, OFILM will hold 51% of the shares of the new joint venture, and TPK will hold 49%. The new joint venture can develop in the direction of automotive touch, and these are still to be discussed.

TPK Chairman Jiang Chaorui said that after the past few years of industrial integration and elimination of the weak and retention of the strong, the touch screen industry has gradually stabilized, and all major manufacturers have achieved their own positioning, and are developing towards a trend of healthy competition and the big ones prevailing. The two major touch screen manufacturers established a strategic partnership mainly because the two sides have a high degree of complementarity in terms of customers, business, and technical levels.

In terms of customers, Liu Shiliang said that the two companies have almost no overlap in their main customers. TPK mainly serves European and American customers, for example, 90% of TPK's revenue comes from American customers, while OFILM is deeply involved in the smartphone and tablet market in mainland China, with 90% of its revenue coming from China. Therefore, the two parties can expand each other's products and services to create higher added value.

O-Film: Revenue increased 43 times in six years

The revenue of OFILM, the largest touch panel manufacturer in China, has grown rapidly from RMB 620 million (NT$2.78 billion) in 2010, the year of its stock listing, to RMB 26.75 billion (NT$120 billion) in 2016, a 43-fold increase in just six years. The key to this growth is that it makes good use of funds raised from the capital market to quickly expand its production capacity.

After the A-share market closed yesterday (21), OFILM issued an announcement that it had signed a "letter of intent to jointly invest in the establishment of a joint venture company" with TPK, with a shareholding ratio of 51% and 49% respectively to establish a joint venture company, combining the technology and production capacity of both parties to establish the R&D, sales and production services of touch and precision optomechanical modules. OFILM's stock price closed at RMB 36.8 yesterday, up 0.35%.

Sina Finance reported that OFILM's main products are touch panels and mobile phone camera modules. After its production capacity became the first in mainland China, it has made a big foray into the smart city field and established its leading position in the optoelectronics industry.

Founded in 2001, OFILM initially engaged in the research, development, production and sales of precision thin film components for fiber optic communications, but its revenue has not improved as the original shareholders were unfamiliar with the industry.

In 2004, OFILM Chairman Cai Rongjun and his brother Cai Gaoxiao acquired all the shares of OFILM and focused their main business on infrared filters and other products. In 2008, taking advantage of the rise of smartphones, OFILM entered the touch panel industry and its business improved. In 2010, OFILM officially landed on the SME board and was successfully listed.

Afterwards, OFILM used the funds raised from the IPO to massively expand its touch panel production capacity, and through measures such as cash capital increase from A-shares, it pushed its touch panel and mobile phone camera module production capacity to the first place in mainland China.

The cooperation between the two parties challenges the status of GIS

OFILM and TPK announced their alliance today, hoping to further grab Apple's touch panel orders. This move will directly impact another Apple touch panel manufacturer, GIS. However, GIS has the full support of Foxconn. Will OFILM and TPK really be able to gain an advantage in the battle against GIS? It remains to be seen.

GIS is the only touch panel manufacturer in the world that makes money from its core business. It stands out in the overall loss-making touch panel industry, mainly because it has the full support of Apple and Foxconn. OFILM is targeting GIS, and a fierce price war may break out between the two parties in the future as they compete for Apple's touch panel orders.

Currently, OFILM has already obtained the low-priced iPad mini touch panel market, and will surely continue to take over Apple's market in the future. Not only GIS should pay attention, but TPK must also maintain its advantage in Apple's touch technology to avoid being poached by Chinese manufacturers.

WitsView said that TPK is an Apple supplier, but facing the challenge of GIS, TPK has gradually lost its competitive advantage, and there is also OFILM chasing behind. For OFILM, TPK's experience has the opportunity to become a shortcut for OFILM to enter the iPad touch supply chain. The common opponent of the two is GIS, which has a complete vertical integration competitiveness. Therefore, after the cooperation between the two parties, they can compete with the embedded touch promoted by LCD panel manufacturers in small-sized touch panels, and compete with GIS in medium-sized touch panels.

WitsView said that for GIS, the alliance between the two major touch panel manufacturers will have little impact in the short term, but in the long run, if GIS wants to expand into the non-Apple touch panel camp, it will be under pressure. At that time, it will depend on whether GIS can leverage Foxconn's assistance to open up the non-Apple market.

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