Apple Touch Panel Supplier TPK Announces Joint Venture with Rival O-film

Taiwanese touch panel maker TPK Holding Co, a key supplier for Apple’s iPhone, iPad and Apple Watch, announced Tuesday its decision to form a strategic alliance with longtime Chinese rival Shenzhen O-film Tech. The two companies will own shares of each other and provide integrated services as competitions in this sector intensify.
(TPK/ LEDinside)                              (O-film/ LEDinside)
TPK’s board approved the sale of a 5.46% stake to O-film for NT$ 1.8 billion (US$ 59.1 million) via a private placement, making the Chinese company the second largest shareholder after TPK’s cofounder.  
The Taiwanese company will also purchase a 0.4% to 0.5% stake in O-film for up to NT$ 900 million (US$ 29.6 million).
In addition, the two will form a joint venture to develop innovative technologies and enjoy the benefits of shared customer bases.
O-film Chairman Ricky Tsai said in a statement that the partnership is a win-win for both sides, and they will work together to facilitate businesses not only in the mobile device market but also new areas such as the automotive sector, AR, VR, and other connected devices.
While some have speculated that TPK’s biggest client Apple had played a role in the deal, TPK’s chief financial officer Freddie Liu said the purpose of forming a joint venture is not about serving any particular client.  
In 2016, around 50% of TPK’s overall sales came from Apple and Microsoft was the second largest client, contributing to 20% of TPK’s revenue.
On the other hand, O-film supplies mainly to local smartphone brands such as Huawei, Xiaomi and Oppo. The Chinese maker also provides finger print modules and camera modules used in electronic devices.
Boyce Fan, Senior Research Manager at WitsView, a division of TrendForce, commented that consolidation is a smart move in an extremely competitive market and will benefit the industry as a whole.
Fan added that through the deal, the two panel makers can complement each other as O-film specializes in film type touch panels that are currently the highly demanded products. TPK, on the other hand, is a veteran producer of glass/glass panels and has the expertise regarding laminating and assembly technologies.
In terms of business operation, Fan said as O-film becomes the second largest shareholder of TPK, a large injection of capital is expected to benefit the Taiwanese manufacturer. Moreover, the Chinese company will own a 51% stake in the new joint venture, which will make it easier for the new business to break into the Chinese market.
As to how the deal would impact TPK’s local competitor GIS, another major touch panel supplier for Apple, WitsView estimated that currently GIS enjoys competitive advantages over TPK, so there is no immediate threat. However, GIS may feel the pressure in the long run when expanding its reach to non-Apple smartphone manufacturers. By then, it may need help from parent company Hon Hai Precision Industry, a key iPhone assembler.
The deal is now waiting to be approved by Chinese regulators but both companies expect it to be completed in one month. 
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