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Formosa Plasma cuts output to cope with price fall

Formosa Plasma Display Corp (台塑光電), a flat panel manufacturing venture between parent company Formosa Group (台塑) and Japan's Fujitsu Hitachi Plasma Display Ltd, is slashing its output to cope with continuing price falls, the company said yesterday.

The company's statement came amid speculation that the plasma-display-panel (PDP) supplier was considering pulling out of the market as the firm has repeatedly delayed putting fresh cash in building the second production line due to technical difficulties.

"We are launching a series of cost-saving efforts, including output reduction to weather the industry-wide downcycle," said Formosa Plasma Display in a statement released yesterday.

Formosa Plasma Display posted a NT$1.4 billion loss last year, blaming an over 38-percent price decline in plasma display panels for 42-inch or bigger, flat-screen TVs since the second quarter of last year, driven by stiff competition.

"But, we have no plan to shut down the production line," the statement said.

Formosa Plasma Display planned to halve its monthly output to 2,000 units in March and would cut the production further in the near future, an executive from Formosa Group told the Taipei Times under condition of anonymity.

As part of its cost-saving efforts, the company encouraged its workers to take vacations during the period and plans to shift an additional part of the workforce to its parent company, according to the statement.

Formosa Group currently holds a 77.5 percent stake in Formosa Plasma, formed in 2002, and Fujitsu Hitachi Plasma owns the rest.

Formosa Plasma Display's latest move was not a shock.

"I'm not surprised at all," said Ken Yu (余文耀), an analyst with SinoPac Securities Corp (建華證券).

"Perhaps it would be a better option for the company to close the money-losing side of the production, following suit with its Japanese rival including NEC Corp," Yu said.

Taiwan's top flat-panel maker AU Optronics Corp (友達光電) announced it would stop making PDP panels several years ago, betting on the prevalence of thin-film-transistor (TFT)-LCD screens.

Chunghwa Picture Tubes Ltd (中華映管), another Taiwanese PDP maker, also held on to its expansion plans as the company is still struggling to make profits from the operation. But the firm carried on its investment in next-generation plants to produce bigger TFT-LCD screens for TVs.
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