Tesla supplier to turn Singapore manufacturing base into regional service hub

Display maker AUO is mulling how to transform its facility in Singapore, with options including moving some of the production equipment to Taiwan for use in micro-LED development. (Photo courtesy of AUO)
 

TAIPEI -- Display maker AUO is preparing to scale back production at its facility in Singapore and possibly move some of the plant's equipment back to Taiwan as the company steps up its bet on advanced micro-LED screens, a technology Apple is also aggressively pursuing, Nikkei Asia has learned.

Micro-LED screens are less power-hungry and can be made thinner than organic light-emitting diode (OLED) displays, the most advanced display technology currently available on the market. Companies like AUO and Apple see them as a way to counter the South Korean and Chinese companies that dominate the OLED segment.

As part of efforts to reorganize its global manufacturing footprint, AUO is mulling how to transform its facility in Singapore, with options including moving some of the production equipment to Taiwan for use in the company's research and development of micro-LED technologies, according to multiple sources familiar with the discussions. A decision will be finalized in early 2024, the people said.

The Singapore facility -- a factory making less-advanced displays that AUO bought from Toshiba Mobile Display in 2010 -- could be turned into a regional service hub to support the company's operations in Southeast Asia, including an upcoming display module factory in Vietnam, according to one of the people with direct knowledge of the matter.

The Singapore facility helped AUO keep up its output of displays during the pandemic-fueled boom in demand for notebook computers and monitors, but has become less essential due to a sudden market downturn that began last year, sources said.

"Honestly, it is a rather small scale facility with a limited display ecosystem there ... not very ideal for making displays," said an executive-level source with direct knowledge of the matter. "AUO has several hundreds of engineers with experience and knowledge there. They will become a strong backup for the company's strategy in the overall Southeast Asia [region]."

AUO told Nikkei Asia it is reviewing its global facilities and the production schedule for the Singapore factory has been arranged until the beginning of next year, adding that it will review its equipment and assets there. No final decision has been made yet.

"We have around 500 employees at the Singapore facility. We will abide by the local government regulations, properly conduct communication and negotiations with the employees, and the interests of employees will be our first priority whilst we conduct operational transformation," the company said.

AUO added that it has been invested locally for years and accumulated customers and experience, and confirmed that the Singapore base could become AUO's important network hub in Southeast Asia in the future.

The discussion over the Singapore facility comes as AUO is reorganizing its domestic factories to make room for the production of micro-LED technology, Nikkei Asia reported earlier.

"AUO, similar to its Taiwanese peers, missed the opportunity to invest in OLED technology, which has become the mainstream of the smartphone industry today and is dominated by South Korean and Chinese display makers," said one of the sources from a company that supplies equipment to AUO. "Just like Apple, if micro-LED technologies succeed, it will be a new opportunity for display makers like AUO" to catch up.

Apple, which usually leaves production to display makers, is getting involved in making micro-LED screens to cut its reliance on Samsung's OLED displays, Nikkei Asia reported earlier.

AUO will begin shipping its first batch of micro-LED screens, to be used for luxury brand Tag Heuer's smartwatches, in the final quarter of this year, said four people familiar with the plans. The project is a priority for AUO, they added, as the company hopes its success will attract other clients in wearables, TVs and automobiles.

AUO declined to comment on specific clients.

Micro-LED screens offer better outdoor brightness performance, making them a good fit for smartwatches, industry experts said. They are also more temperature-tolerant than OLED displays, which is more suitable for automotive use.

AUO ranks fourth among automotive display suppliers by shipment, trailing China's BOE Technology and Tianma Microelectronics, as well as Japan Display, according to research agency TrendForce.

The company is aggressively investing in R&D and production of micro-LED technology to curb its reliance on its mainstream liquid crystal display (LCD) business, which is extremely sensitive to market dynamics. AUO reported net losses of 21.1 billion New Taiwan dollars ($685.5 million) for 2022 due to the sudden slowdown in appetite for consumer electronics, with a further NT$10.91 billion net loss in the first three months of this year.

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