Taiwanese display panel maker Innolux Corporation has announced plans to shut down its Fab 5 facility in Tainan by mid-2026, marking another step in its strategic pivot away from traditional panel manufacturing. The move follows the sale of its Fab 4 plant to TSMC in 2024.

On July 9, Innolux held an internal meeting to confirm the gradual closure of the Gen 5 fab, with production of notebook, monitor, and medical-use panels to be transferred to the Zhunan T2 and Tainan Fab 3 facilities. The company stated that the restructuring is part of ongoing efforts to optimize capacity, adapt to market conditions, and increase the contribution of non-panel businesses.

“In line with shifting market demand and our focus on long-term growth segments, the consolidation of Fab 5 capacity will enhance operational flexibility and improve resource allocation,” the company noted in a July 10 statement. Innolux emphasized that the transition will be carefully managed to avoid disruptions for customers, including support for production transfers and recertification.

Fab 5 primarily produced mid-sized panels, including those for laptops and medical equipment. While these products will be relocated, the closure has raised speculation about Innolux's gradual retreat from its core display business and its broader strategic transformation.

The fate of the Fab 5 facility after shutdown remains uncertain. Industry observers note that the sale of Fab 4 to TSMC last year—used to expand CoWoS advanced packaging capacity—generated NT$17.14 billion in proceeds and NT$14.7 billion in profit, contributing to Innolux's swing back to profitability in 2024. A similar divestment of Fab 5 is seen as likely.

Earlier speculation suggested that TSMC and Micron could be potential buyers of Fab 5. However, TSMC's recent focus on U.S. expansion has cooled its interest in further acquisitions in Taiwan. Micron, meanwhile, is still integrating two factories it acquired from AUO in Tainan and is reportedly waiting for clarity on future U.S. tariffs before committing to additional investments.

Innolux's June 2025 revenue reached NT$18.51 billion, down 1.23% year-on-year. Q2 revenue totaled NT$56.23 billion, representing a 1.11% annual decline but a 0.53% sequential increase. First-half revenue rose 4.48% to NT$112.16 billion.

The company is accelerating its transformation strategy, with plans to begin mass production in semiconductor advanced packaging in the second half of 2025. It is targeting rapid revenue growth in this segment and expanding into automotive displays, medical imaging, and fan-out panel-level packaging (FOPLP).

The shutdown of Fab 5, combined with broader industry shifts and the repositioning of players like TSMC and Micron, reflects a changing landscape in both the display and semiconductor sectors, as companies adapt to geopolitical pressures, capacity realignments, and emerging high-growth markets.