Taiwan’s Chimei Innolux, the world’s No.3 LCD maker, is in talks with banks to extend loan payments with the help of the government, a government official said on Tuesday, in another sign of stress in parts of the export-led economy.
The Ministry of Economic Affairs has sent official documents to banks to lobby for a new debt arrangement for Chimei Innolux, delaying repayment of T$5.6 billion ($186.45 million) in principal that matured on Monday, a ministry official told Reuters.
“The latest T$5.6 billion is a lot of money to Chimei. If it repaid the whole debt, its liquidity would become very tight,” the official said.
Hi-tech exports are the mainstay of Taiwan’s economy, but have struggled in recent months as the global economy slows.
The LCD industry has been hard hit by falling panel prices, with the island’s top two makers, AU Optronics and Chimei, posting big losses in the third quarter and giving gloomy outlooks.
The Taiwanese players face particularly strong competition from bigger South Korean rivals such as Samsumg Electronics and LG Display.
Both Chimei Innolux and AU Optronics are reported to have put workers on unpaid leave because of slowing business.
Meanwhile, another key tech industry, DRAM chips, is also struggling with falling prices. Promos had T$57 billion in debt as of last year and had been given, at government prodding, a syndicated loan at only 0.1 percent interest to keep it alive until it finds a strategic investor.
Taiwan is also considering using cash from a state fund to promote greater integration among hi-tech industries struggling with a global slowdown, including the solar and flat panel sectors, the top government economic planner said in November.
Following the official documents from the government, Chimei Innolux must still negotiate with the banks directly, and the banks will decide whether they will agree to delay the repayment in two weeks.
According to local reports, Chimei has debt of over T$240 billion, of which around T$60 billion matures in the short term.
Chimei Innolux said in a statement on Tuesday that it is currently operating normally.
“To ensure operations through the many repayments in the coming two years amid an unstable global environment… the company has applied for the debt rearrangement aid from the government.”
The official said the government is supporting the LCD industry because it has a big impact on the whole supply chain and the government has invested a lot to nurture the industry.
Giving up the industry would also lead to a monopoly for the Korean firms, which would be harmful to the global tech industry, the official added.
Chimei Innolux posted a net loss of T$44.45 billion in the first three quarters of last year. Its full-year sales of T$501.14 billion, however, were up 4.4 percent compared with a year earlier.
LG Display said on Monday it expects prices for LCD screens to rebound from late in the first quarter as TV manufacturers begin restocking ahead of new product releases.
On Tuesday, Chimei Innolux slipped 0.78 percent, versus 0.13 percent up in the broader market. Rival AU Optronics rose 4.38 percent.