Fri, Feb 04, 2005 - Page 10 News List

Chunghwa Picture optimistic on 2005 flat-panel outlook

By Amber Chung  /  STAFF REPORTER

Chunghwa Picture Tubes Ltd (中華映管), the nation's third-largest flat-panel maker, yesterday painted a bright outlook for the sector, predicting the supply glut will ease this year, thanks to rising market demand.

"Despite the seasonal effect, demand for thin-film-transistor liquid-crystal-display [TFT-LCD] panels is expected to heat up and boom in the second half of the year," Chunghwa Picture's sales and marketing vice president Liu Chih-chun (劉治軍) told investors yesterday.

The company forecasts market demand will jump to 172.3 million panels this year from 124.4 million last year, with supply increasing to 196.3 million panels from 135.4 million.

Oversupply pressure could ease this year, Liu said, citing the company's projections for oversupply rates of 6.5 percent, 9.4 percent and 7.5 percent in the first three quarters of the year. The figures are much lower than predictions by research houses of 10.7 percent, 15 percent and 12.6 percent over the same period.

Even so, the company saw profits nosedive in the fourth quarter. Chunghwa Picture yesterday reported a pre-tax loss of NT$4.39 billion for the three months through December, marking a 275 percent plunge from the previous quarter.

Revenues reached NT$24.19 billion, down 13 percent quarter-on-quarter.

For the whole of last year, the company's profits before tax soared sixfold to NT$10.76 billion on sales of NT$117.41 billion, up 32 percent from 2003.

The nation's panel makers -- with the exception of AU Optronics Corp (友達光電) -- have all reported poor fourth-quarter performances.

But Chunghwa Picture's was the worst, said Robert Lin (林家宇), a flat-panel market watcher at with Yuanta Core Pacific Securities (元大京華證券).

Chunghwa Picture reported a negative 33.7 percent in operating income rate and another negative 16.1 percent in gross margin, according to Lin.

He attributed the company's huge losses to low average selling prices (ASP), which plummeted to US$141, below the level of around US$160 and US$170 seen at its rivals. This was due to the company giving more rebates to clients, as well as a poorer yield rate and less bargaining power in materials procurement.

The company's margins may deteriorate further in the second quarter, Lin said, as it has decided to expand its 19-inch panel output.

Lin expects the ASP of 19-inch panels to drop by 10 percent to 20 percent in the future.

Chunghwa Picture plans to ship 3.5 million TFT-LCD panels for laptops and 12 million TFT-LCD panels for desktop computers this year, up from 1.55 million pieces and 9 million pieces last year, respectively, Liu said.

Additionally, betting that LCD televisions will take off -- with global demand expected to reach 17 million units this year -- the company will boost its TFT-LCD television panel shipment to 1.6 million pieces from last year's 300,000 pieces, Liu said.

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