Wed, Feb 02, 2005 - Page 10 News List

Chi Mei foresees improvement in Q1

DISPLAYS The company said rising demand in the current quarter should offset recent price declines, which were cited as the reason behind a lackluster fourth quarter result


Chi Mei Optoelectronics Corp (奇美電子), Taiwan's No. 2 maker of liquid-crystal-screens, expects profitability to improve in the current quarter as rising demand is expected to offset continued price declines, company officials said yesterday.

The optimistic comments came after the company reported a disappointing fourth quarter result on Monday, for which it blamed crumbling prices. Meanwhile, the firm's South Korean rivals, including Samsung Electronics Co, beat market expectations by eking out profits during the downturn.

"We feel the first quarter should be a better period, compared to the fourth quarter as prices are stabilizing on exuberant demand," company president Ho Jau-yang (何昭陽) told investors.

In the final quarter of last year, panel prices tumbled by roughly 20 percent from the previous three-month period to average US$199. The declines occurred at a faster-than-expected pace, Chi Mei said.

The price erosion led Chi Mei to report its first loss in two years. Last quarter, the Tainan-based company lost NT$3.5 billion, or NT$0.93 per share, bigger than the NT$2.3 billion loss it had estimated previously. Revenue was flat at NT$23.86 billion versus the third quarter.

"Now we're seeing supply constraints for certain sizes, which may give some leeway for an uptick in panel prices," company vice president Jeff Hsu (許春華) said.

Backed by rising demand for monitors and TVs, shipments are expected to grow by a double-digit percentage point in the January-March period from the previous three months, Hsu said.

That growth, coupled with stabilizing panel prices, would help push the company's gross margin higher this quarter, said Frank Su (蘇穀祥), an analyst with BNP Paribas Peregrine Securities Ltd in Taipei.

"It's time to buy Chi Mei shares now," Su said.

Not every analyst buys Chi Mei's bullish outlook, however. Frank Wang (王安亞), an executive director with Morgan Stanley & Co in Taipei, said, "Demand is rebounding. But, we need to watch how long the strength can be sustained."

"People are looking for reasons to be optimistic. But, figures do the talking. It's still uncertain that Chi Mei will return to the black in the second half after a big loss of NT$3.5 billion," Wang said.

Looking ahead, Chi Mei, which supplied about a quarter of the 8 million liquid-crystal-display (LCD) panels used around the world last year, said it is cautiously optimistic on the outlook for this year, particularly the slim-screen TV market.

Chi Mei, which supplies LCD panels for many Japanese TV vendors, including Sony Corp, expects global demand to more than double to around 20 million units this year.

To meet the growing demand, Chi Mei plans to spend around NT$55 billion on new facilities this year, mostly on its advanced 5.5-generation plant. The factory is scheduled to ramp up in March and will produce bigger LCD panels, including 27-inch and 32-inch sizes for TVs.

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