HSINCHU, Taiwan -- Contract electronics maker Hon Hai Precision Industry and its LCD panel subsidiary Innolux will buy stakes in North American television brand Vizio, the Taiwanese companies said Wednesday, part of the group's strategy to expand in the U.S. market.
Hon Hai, known as Foxconn Technology Group, will acquire a 3.1% stake in Vizio for $24.99 million while Innolux purchases 4.14% of the TV brand for $44.99 million, the two firms' filings with the Taiwan Stock Exchange show.
The strategic investment in Vizio ensures Innolux steady shipments to the TV brand over the long term, Jim Hung, Innolux special assistant to the chairman, told reporters Wednesday ahead of the company's announcement. "This will also help mitigate the industry oversupply volatilities," he said.
Innolux resumed assembling televisions last year, and its clients include Foxconn-controlled Sharp. The liquid crystal display panel maker assembles around 300,000 TV sets monthly, and expects to reach 500,000 sets next quarter. Hung said the new alliance lends important support to this operation.
Vizio shipped 5.65 million TVs last year for a global market share of 2.7%, Taipei-based market researcher WitsView says.
News of the Vizio investments comes one week ahead of Foxconn's groundbreaking ceremony for its $10 billion LCD plant in the U.S. state of Wisconsin. Though Foxconn did not elaborate on its purchase, the deal paves the way for potential TV assembly operations at the eventual Wisconsin manufacturing site and gives the company access to the U.S. sales channels developed by Vizio.
Meanwhile, the Innolux board approved naming Hung as chairman, effective Thursday, and accepted the resignation of Chairman and CEO Wang Jyh-chau. Wang will serve as a consultant to Innolux.
Reports have circulated in recent months that Wang, who has worked in the LCD panel industry for 28 years, would depart the company to lead the integration of resources between Sharp and Innolux for Foxconn. Wang also reportedly will oversee Foxconn's ongoing construction of a 10.5th-generation liquid crystal display plant in Guangzhou.
"Sharp has LCD technologies, and Innolux has good manufacturing capability," Wang told reporters Wednesday. "From Foxconn's perspective, it will be a pity if we don't integrate and leverage their strengths."
The LCD panel industry continues to face a supply glut that Taiwanese display makers have little chance of solving, and the Japanese display makers could face a similar conundrum if Taiwanese and Japanese peers do not work as a team, Wang said.
"The rising Chinese rivals could inevitably dominate the industry," he said.
Innolux's net income ballooned to 37.02 billion New Taiwan dollars ($1.22 billion) last year, up from NT$1.87 billion in 2016, driven by rising average sale prices for large LCD panels amid the constrained supply.
But average sale prices have begun falling again as Chinese compatriots such as BOE Technology Group and China Electronics Panda Crystal Technology gradually add new production capacity.
The industry volatility slashed Innolux's net income by 75.27% on the year to NT$2.93 billion for the quarter ended in March. Revenue in the first five months of 2018 shrank 23.89% on the year to NT$108.46 billion.
IHS Markit analyst David Hsieh said the large-sized display industry faces a challenging year as Chinese companies continue increasing capacity.
"It is likely that the industry will see three straight years of oversupply from now to 2021, unless some display makers decide to close some production lines or consolidate with other firms," Hsieh said.
Nikkei staff writer Cheng Ting-fang contributed to this report.