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Display makers get SARS payoff

Oris Huang demonstrates the latest flat-panel TV screen technology at Taipei's Nanking East Road FNAC yesterday. Suppliers of flat-panel displays are expected to benefit from higher-than-expected prices this year as SARS may curb excess supply. The Sony 30'' TV retails for NT$249,000. PHOTO: SEAN CHAO, TAIPEI TIMES

Samsung Electronics Co and other suppliers of flat-panel displays used in personal computers and televisions will benefit from higher-than-expected prices this year because SARS will curb excess supply, an analyst said.

Construction of production lines has been delayed after Japanese equipment suppliers canceled trips to Taiwan and China because of the outbreak of SARS, said Ross Young, president of market researcher DisplaySearch.

Analysts and investors have predicted second-half losses for most suppliers in the flat-panel industry, forecast to be worth US$21.4 billion this year, because prices are expected to fall as new plants start churning out the screens. Taiwan and China, two of the fastest-growing suppliers, have the world's third-highest and highest number of SARS cases.

"SARS could keep prices up and help the industry to be healthier than anticipated in the second half," said Young, who declined to give specific price forecasts, in an interview.

"All of the companies should make profits from the second quarter on," he said.

Panel prices will still fall in the second half, according to Young. The price of a 17-inch screen, which may become the most widely used screen for personal computers later this year, will drop by about 11 percent between now and December, while benchmark 15-inch screen prices will decline about 9 percent, he said.

South Korea's Samsung, the world's largest flat-panel maker, and smaller rivals in Asia will be "very healthy," he said.

The price of a 15-inch screen, which tumbled to as low as US$170 in the first quarter this year from about US$250 in June last year, is now about US$190. A 17-inch screen sells for about US$250.

At least four companies in Taiwan -- AU Optronics Corp (友達光電), Chi Mei Optoelectronics Corp (奇美電子), Quanta Display Inc (廣輝電子) and HannStar Display Corp (瀚宇彩晶) -- this year are opening some of the world's first so-called fifth-generation factories that can make screens for televisions that measure 30 inches diagonally and larger.

The new plants are helping cut costs by increasing the screens that can be made from a single plate of glass material.

AU Optronics, the world's fourth-largest maker of flat-panel displays, said on May 29 it expects second-quarter profit of NT$1 billion (US$28.9 million) as prices and demand for large computer screens improve from last year.

The company's shares have since gained more than 16 percent.

The forecast implies a three-quarters drop in net income from NT$3.9 billion a year ago and a more than fivefold increase from NT$179 million in the first three months of this year.

AU Optronics has installed most of its equipment for its first fifth-generation line and is starting installation for a second plant, Young said.

Chi Mei, Taiwan's second-largest supplier, and HannStar have probably been set back in their plans to install new equipment, Young said.

The companies' larger rivals in South Korea -- Samsung and LG Philips LCD Co -- opened the first fifth-generation factories last year. Additional production from new factories in Taiwan threatens to swamp the market and hurt profits of all makers.

Chi Mei has posted two consecutive quarters of losses starting in the three months ended on Dec. 31 last year. Flat-panel prices fell as much as 30 percent in the fourth quarter of last year, according to Austin, Texas-based DisplaySearch.

The companies are investing to meet an expected demand for flat-screen televisions that helped Japan's Sharp Corp, which dominates the TV panel business, nearly triple profit in the year ended March 31.

SARS is also contributing to delays in construction of new factories in China, Young said.

One of the would-be suppliers in China, BOE Technology Group Co (京東方科技集團), is planning the first sale of Class B Shares in the nation in almost three years. It will use the capital it raises to pay part of a loan used to finance the purchase of a flat-panel display unit from South Korea's Hynix Semiconductor Inc.

The other is a venture between SVA Electron Co of Shanghai and Japan's NEC Corp.
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