TCL has reached a settlement with AUO, paying 4 billion yuan to increase its stake in Huaxing Optoelectronics Co., Ltd. to 85.71%. This move marks a significant step in TCL’s strategy to consolidate control over its key subsidiary and strengthen its position in the display industry.
TCL Group (000100.SZ) has been actively expanding its presence in the panel sector. On September 24, 2017, it announced the signing of a "Settlement Agreement" with AUO, resolving long-standing disputes over intellectual property rights related to display technology. The agreement marks a major milestone in cross-strait cooperation and is expected to pave the way for more seamless operations of Huaxing Optoelectronics on a global scale.
The dispute between TCL and AUO dates back to 2013, when conflicts arose over technology-related IP issues. As the mainland panel industry grew, many top talents from Taiwan were lured away by high salaries, causing concerns within the local industry. AUO had previously taken legal action against TCL and some of its employees. However, the recent reconciliation reflects a shift in strategy, likely influenced by the declining fortunes of the Taiwanese panel sector and the rising dominance of Chinese manufacturers like TCL.
Just days before the AUO deal, TCL also announced plans to acquire an additional 10% stake in Huaxing Optoelectronics for approximately 4.034 billion yuan. This acquisition brings TCL’s total ownership to 85.71%, with remaining shares held by China Development Fund (11%) and Guangdong Finance Trust (3.28%). The company aims to eventually own 100% of Huaxing and has committed to repurchasing the remaining stakes in the future, as per prior agreements.
Huaxing Optoelectronics has become a major revenue driver for TCL. According to the 2017 semi-annual report, Huaxing generated 13.54 billion yuan in sales, up 49.2% year-on-year, contributing 26% of TCL’s total revenue. Its EBITDA reached 5.48 billion yuan, up 149.7%, accounting for nearly 93% of the group's total earnings.
Despite earlier attempts to list Huaxing separately on the A-share market, the plan was abandoned due to regulatory restrictions. Instead, TCL is now focusing on integrating Huaxing into its broader financing structure, potentially through Hong Kong-based listings. Li Dongsheng, TCL’s chairman, emphasized that the biggest capital investment lies in Huaxing, and while spin-off options are limited domestically, the company is exploring alternative ways to finance and grow the business through its parent platform.
On November 6, TCL announced that its share issuance to acquire assets and related-party transactions had been approved by the China Securities Regulatory Commission (CSRC). The transaction involves purchasing 10.04% of Huaxing’s shares from several shareholders, further solidifying TCL’s control. This move aligns with TCL’s long-term vision of consolidating its semiconductor display business under one umbrella.
Founded in 2009, Huaxing Optoelectronics specializes in the R&D, production, and sales of semiconductor display panels. Initially established as a joint venture between TCL and Shenzhen Shenchao Technology, the company has since undergone multiple capital increases and equity transfers. After Shenchao Technology withdrew, TCL’s stake rose to 75.67%, and now, with the latest investment, it stands at 85.71%.
Thanks to strong performance in LCD panel manufacturing, multimedia services, and financial investments, TCL delivered impressive Q1-Q3 results this year. The company reported operating income of 82.21 billion yuan, up 5.82% year-on-year, with net profit reaching 3.03 billion yuan, a 48.6% increase. These figures highlight the growing importance of Huaxing in driving TCL’s overall profitability.
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