AU Optronics reduces forecast for Q3

AU Optronics Corp (友達光電), the world's No. 3 maker of flat-display panels for computers and televisions, yesterday trimmed its third-quarter outlook, blaming weaker-than-expected demand after posting a surprising 23 percent drop in sales last month.

AU Optronics said consolidated sales slid to NT$11.22 billion (US$330 million) last month, compared to NT$14.56 billion in July as prices for large-sized liquid-crystal-display (LCD) screens fell at a faster-than-expected pace.

"Third-quarter shipments of large-sized flat panels and average selling prices will drop at a sharper rate than we projected in July," AU Optronics said in a statement issued yesterday.

In July, the company told investors that third-quarter shipments would remain flat and large-sized slim panels would fall between 10 percent and 15 percent.

"The sales decline is much sharper than my expectations," said Eric Lin (林宜正), an analyst with Yuanta Core Pacific Securities (元大京華證券) who had forecast a 15 percent drop.

"This is also a sign that inventory problems are still plaguing LCD screen makers," Lin said.

Shipments 10-inch or larger flat screens for computers and TVs fell 18.6 percent at a monthly rate to 1.28 million units last month as major customers tried to use up their inventories, AU Optronics said.

Small Chi Mei Optoelectronics Corp (奇美電子), however, regained some ground saying that its consolidated sales rose 2.6 percent last month to NT$9.32 billion from NT$9.08 billion in July.

Unit also increased 7.5 percent to 1.11 million from July's 1.03 million, Chi Mei said in a statement.

In light of the stagnant demand for high-priced slim-screen TVs, Chi Mei has decided to suspend construction of its 7.5-generation (7.5G) glass panels plant, said Loreta Chen (陳靜燕), a public relations official.

The decision to delay construction also reflects the industrywide uncertainty over the cost-efficient size of glass substrates, Chen said.

The 7.5G fab was scheduled to begin operating in the first quarter of 2006. The 7G, or 7.5G, plants are used to produce LCD panels for 40-inch or larger slim-screen TVs.

"Chi Mei made a correct decision as long as the postponement will not put it much behind its schedule for opening," said Frank Su (蘇穀祥), an analyst with BNP Paribas Peregrine in Taipei.

"Size is a more important issue as it will affect how much cost a flat-panel maker can save," Su said.

The deferral will not affect the company's NT$48.5 billion expenditure for new equipment for this year, Chen said.

Chi Mei also slowed down its pace in ramping up its 5G plant, she added. But it remains on schedule for the 5.5G factory to start mass production in the first quarter of next year, Chen said.

Last month, market researcher DisplaySearch reduced capital expenditures by global LCD panel makers by nearly 4 percent -- from US$29.1 billion to US$28 billion -- during the three-year period to 2007, citing the postponement of new capacity expansion.