Color filter shortage is a boon for Allied Material

Allied Material Technology Corp (AMTC, 展茂光電), one of Taiwan's biggest color filter makers, expects this year's earnings to skyrocket nearly seventy-fold from last year due to a more severe than expected supply crunch in the flat-screen industry, a company executive said yesterday.

As Japanese color filter makers -- which supply half of local flat-panel makers' needs -- have sharply reduced their supplies over the past few months, AMTC president Arthur Chou (周國輝) said he expects the shortage of the key flat-panel component will extend through the second half of the year.

"We previously predicted the shortage would be in place during the first six months of this year, but the situation appears to be worsening as demand for flat-panels will remain strong, despite a temporary slow-down in the second quarter of the year," Chou said.

Benefiting from the severe shortage, AMTC predicted its 2004 after-tax profits will surge to NT$689 million, or NT$0.78 earnings per share after eking out profits of NT$10 million, or NT$0.01 earnings per share last year, according to Julian Hsu (許子正), chief financial officer of AMTC.

Hsu said better prices and a doubled gross margin, along with a 60-percent increase in shipments, are also important factors behind the surge in earnings this year.

Actually the continuous supply crunch has given color filter makers a rare chance to raise prices and will give a boost for those component makers, Chou added.

AMTC and its rival Sintek Photronic Corp (和鑫光電) have raised color filter prices by some 8 percent on average in the first quarter. Chou said there was still ample room for further price hikes this year, but it will not be steep.

Analysts, however, expressed a more cautious attitude towards the shortage problem.

"I don't expect the shortage to ease in the first half, but it is too early to say if the situation will carry into the second half, said Eric Twu (涂紀華), an analyst with SinoPac Securities Corp (建華證券).

Twu expected color filter demand to outpace supplies by 10 to 20 percent during the first six months of this year. But anticipated stable supplies of color filters from AU Optronics Corp (友達光電) and Sintek will more or less offset the current shortage, he added.

Martha Chen (陳紅), an analyst at Primasia Securities Co, also said supplies have been tight for some time, citing sources from local flat-panel makers. But she did not expect to see the shortage seriously hurt panel shipments.

The four-year-old AMTC, which had a 17 percent market share last year, has planned to trade its shares in March on the Gretai Securities Market (櫃台買賣中心), the nation's over-the-counter market. The stock-listing will make AMTC the second color filter maker to go public after Sintek listed on the TAIEX in September 2002.

AMTC currently supplies small-and-middle-size color filters to AU Optronics and Hon Hai Precision Industry Co (鴻海精密), in addition to many local flat-panel makers.

To secure stable supplies of color filters, local flat-panel makers Quanta Display Inc (廣輝) and Toppoly Optoelectronics Corp (統寶光電) have invested in AMTC through their parent companies Quanta Computer Inc (廣達電腦) and Compal Electronics Corp (仁寶), respectively.