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Chi Mei posts significant earnings on TV demand

"We are confident in the TV market. The unit sales of our TV panels will grow by another 10 percent to reach 2.2 million units this quarter."

Ho Jau-yang, Chi Mei Optoelectronics president

Chi Mei Optoelectronics Corp (奇美電子), Taiwan's second-largest maker of flat panels for televisions and computers, posted its second-highest quarterly earnings boosted by strong demand for high-priced TV panels.

Chi Mei Optoelectronics, Taiwan's biggest maker of TV flat panels, posted quarterly earnings of NT$8.33 billion (US$255 million), or NT$1.7 per share, for the October-December period of last year.

That also reversed a loss of some NT$3.51 billion amid severe oversupply in the final quarter of 2004.

The gross margin for the fourth quarter jumped to almost 25 percent, outpacing all competitors including the world's biggest player LG Philips LCD Co of South Korea.

The company expected that sustained demand from slim-screen TVs would partly offset weak computer demand in the traditionally slack January-March quarter.

"We are confident in the TV market. The unit sales of our TV panels will grow by another 10 percent to reach 2.2 million units this quarter from last quarter," president Ho Jau-yang (何昭陽) told investors yesterday.

The optimism also reflected the company's aggressive capital spending of NT$100 billion for this year, up 67 percent from NT$61 billion spent last year.

The company aims to repeat last quarter's sales of 7.4 million units in the first three months of this year, Ho said.

But the profitability may trend lower in the current quarter as the price would fall slightly due to seasonal factors, Ho said, echoing LG Philips LCD, which forecast a 5-percent drop.

The panel price jumped 13 percent to average US$219 per unit in the final quarter of last year from US$193 a year earlier, according to Chi Mei Optoelectronics' statistics.

Frank Lee (李宜家), who tracks the liquid-crystal-display (LCD) industry for Deutsche Securities in Taipei, attributed the stronger performance to robust demand for mainstream 32-inch TVs.

"Taiwanese flat-panel makers have stronger competitiveness in the TV panel area. Besides, they sold more 32-inch panels than their Korean rivals, which are busy developing bigger-sized panels," Lee said.

The TV business made up almost half of Chi Mei Optoelectronics' total revenues in the final quarter of last year, up from some 35 percent a year ago.

Lee said Chi Mei Optoelectronics' fourth-quarter results largely matched his expectation.

Lee gave a "buy" rating on Chi Mei Optoelectronics with a 12-month target price of NT$68. That implies a 33-percent upside from Chi Mei Optoelectronics' closing price of NT$51.1 yesterday.

For the full year last year, Chi Mei Optoelectronics' net income plunged over 53 percent to NT$8.03 billion, the company said in a statement.

Revenues, however, leapt nearly 50 percent to NT$152.85 billion year-on-year, the company said in a statement released earlier.

Chi Mei Optoelectronics also announced yesterday that it had signed an agreement with Sharp Corp to share several thousand patents related to manufacturing panels for LCD TVs and computers in a bid to expand their customer base.

"The deal will help us lure more customers from Japan, where Chi Mei Optoelectronics has a weaker customer base," Hsu Chun-hwa (許春華), a vice president of the company, told the Taipei Times.

Under the agreement, the two companies will not file patent infringement lawsuits against each other and their customers for a five-year period.
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