Price fears hit AU shares

Shares of AU Optronics Corp (友達光電), the world's No.3 maker of liquid-crystal display (LCD) panels for computers and televisions, fell yesterday on lingering worries about deepening price decline for LCD panels after rival LG Philips LCD Co warned of severe pricing erosion in the current quarter.

The South Korean slim-screen maker warned overnight that average panel prices will tumble nearly 20 percent quarter-on-quarter in the fourth quarter, faster than a 10 to 15 percent range forecast previously.

The company also expects continued downward price pressure in the first half of next year, LG Philips LCD said in a statement on Tuesday.

AU's shares were later bolstered by the company's optimistic forecast, but still declined 2.42 percent to close at NT$44.4 on the Taiwan Stock Exchange.

A Chinese-language business daily yesterday reported that resilient seasonal demand may carry into the next quarter, quoting AU vice president Hsiung Hui (熊暉).

An AU official confirmed Hsiung's forecast.

"We feel that panel demand for LCD monitors and LCD TVs is extending to December. We also feel a supply constraint for certain sizes," said Hsiao Ya-wen (蕭雅文), a senior manager of AU's administrative division.

In the past, demand for slim-screen monitors usually peaked in November, Hsiao said.

"In such circumstances, AU's operation could hit the bottom in the first quarter. Price decline will slow down on improved demand," she said.

Shares of smaller rival Chi Mei Optoelectronics Corp (奇美電子) fell 1.19 percent to NT$41.5 and Quanta Display Corp (廣輝電子) slipped 0.6 percent to NT$18.10. Shares of LG Philips LCD shed 5.5 percent to 37,500 won (US$35.52) in Seoul.

"The renewed concern about further price decline triggered a sell-off of shares of AU and its local competitors from cautious investors," said Kevin Chung (鐘國忠), an analyst with Jih Sun Securities Investment Consulting Co (日盛投顧).

Overseas investors sold a net of 8.59 million AU shares yesterday alone, according to stock exchange statistics.

Ken Yu (余文耀), an analyst who tracks the thin film transistor-LCD industry for SinoPac Securities Corp (建華證券), is also cautious about further price declines for slim screens and cast doubt on AU's optimism.

"The ball is in the South Korean companies' court," Yu said.

LG Philips LCD, which has been a major price killer since the third quarter, is still capable of waging new price wars because it is making profits, Yu said.

On the contrary, AU is expected to swing into a loss in the fourth quarter as panel prices have already dropped below cost, Yu said.

"Recent signs did point to an improvement in demand, but it is hard to say when the prolonged price decline will end," Yu said.

Yu forecast that the Taiwanese company would post a smaller-than-expected loss of NT$700 million, or NT$0.14 a share, for the current quarter.

AU projected in October that the quarterly loss would be around NT$1 billion.