Sat, Nov 20, 2004 - Page 10 News List

Chunghwa Picture sees fleeting upturn

INVENTORY Increased Christmas demand will only temporarily relieve the drawn-out supply glut in the flat-panel display sector, the company's chairman said

By Lisa Wang  /  STAFF REPORTER , IN TAOYUAN

Chunghwa Picture Tubes Ltd (中華映管), the nation's third-largest maker of flat-panel displays, expects the drawn-out supply glut to worsen in the traditionally slack first quarter next year after a brief rebound fueled by Christmas demand, the company's chairman Frank Lin (林鎮宏) said yesterday.

"We're seeing orders flow back, but most of them are merely short-term orders for the Christmas shopping spree. We haven't seen long-term demand yet," Lin said.

Chunghwa Picture's outlook is more conservative that that of its bigger rival AU Optronics Corp (友達光電), which said last month that it expects the Christmas rebound to be sustained into the first quarter.

Chunghwa Picture's shipments will increase slightly this month from last month's 900,000 units, but the growth momentum could end there, Lin said, adding that he expected shipments to remain flat next month and in January.

The supply glut could worsen to exceed demand by about 10 percent, up from the current healthy level of 6 percent, Lin said.

But smaller rival HannStar Display Corp (瀚宇彩晶) apparently agrees with AU Optronics' optimistic outlook.

"We expect supply to almost reach parity with demand in the first three months of next year," said Chou Ding-huei (周定輝), president of HannStar Display.

Chou said HannStar Display felt that a drastic price correction is stimulating demand in the current quarter, which will greatly help level off the inventory accumulated in the past quarter.

"Price has dropped to approach most companies' cash cost of US$165 for a 17-inch LCD screen," he said, adding that panel prices are hitting rock bottom.

Chou said eh expects the exuberant demand to bring a full recovery in the second quarter of next year.

Syndicate loan

Despite facing a highly cyclical industry environment, Chunghwa Picture yesterday secured a US$150 million syndicate loan from 10 banks led by Chinatrust Commercial Bank (中國信託).

Chunghwa Picture will use the capital to build a next-generation plant to produce color filters, which make up a bulky 20 percent of its cost structure, as part of its cost-saving efforts.

The latest loan brings the amount Chunghwa Picture has raised for new manufacturing equipment this year through syndicate loans and issuance of rights issues and overseas convertible bonds to more than NT$60 billion (US$1.84 billion).

Quanta Display Corp (廣輝電子), a joint venture between Quanta Computer Inc (廣達電腦) and Sharp Corp of Japan, said its plans for a new fab will be on schedule.

The company announced yesterday that it has raised US$280 million by issuing overseas convertible bonds to expand its next-generation factory.

The five-year, zero-coupon bonds can be converted into the company's common shares at NT$20.02 each, a 9 percent premium to Quanta Display's closing price of NT$18.4 yesterday.

Meanwhile, HannStar Display is considering postponing a NT$20 billion syndicate loan after it decided to delay construction of a new plant by six months as a result of stagnant demand, Chou said.

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