Shares of flat-panel display makers dropped yesterday on reports that panel prices will decline in the first quarter, but analysts said the likelihood of a market crash next year is slim.
Chinese-language newspapers reported that flat-panel display prices will decline in the first quarter due to rising supply and weaker-than-expected demand, citing Hon Hai Precision Industry Co (鴻海精密) chairman Terry Gou (郭台銘).
In the reports, Gou said Taiwan's liquid crystal display (LCD) industry is expected to experience a crucial point during the first quarter as a result of fast expansion of capacity. He based his forecast on the theory that ongoing high price tag could dampen buying sentiment for flat-screen televisions.
On the TAIEX, the nation's three largest flat-panel makers AU Optronics Corp (友達光電), Chi Mei Optoelectronics Corp (奇美電子) and Chunghwa Picture Tubes Ltd (中華映管) dropped nearly 5 percent, respectively, while smaller rivals Quanta Display Inc (廣輝電子) and Hannstar Display Corp (瀚宇彩晶) were set back about 7-percent to end at NT$15.90 and NT$13.60 each.
"I still hold a positive outlook for the flat-panel industry as the demand remain very strong," said Sean Wu (
Analysts said the demand for flat panels will primarily come from the need for monitors and notebook computers, while those for flat-screen televisions will remain lukewarm.
That booming demand will drive local LCD makers' earnings next year, Wu said. The earnings growth will be at 50-percent pace on annual base to total about NT$22.7 billion, he added.
Wu said that slow demand in flat-panel TVs will only wield very limited impact on profitability as the gross margin for such TVs is as high as 60 percent.
"Taiwanese flat-panel makers still have ample room to drop their prices, while keeping their earnings healthy," he said.
Martha Chen (
"Though overcapacity remains a concern for industry watchers, I still think the demand will mostly match supply for the full year of 2004," Chen said.
It is premature to say how strong the demand for LCD-TV will be, but one thing that is certain is that the increasing application of flat panels will offset the potential impact of weaker-than-expected demand for televisions, she said.
Taiwan's major flat-panel players did not expect their earnings to erode oversupply next year.
AU chairman Lee Kun-yao (李焜耀) said in late October that he was cautiously optimistic about the demand-supply situation next year, despite the emergence of a temporary and single-digit oversupply in the slack third quarter next year.
Chi Mei president Ho Chao-yang (何昭陽) shared the optimism about the balance of demand and supply, saying that it will be a profitable year for Chi Mei next year.
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