The financial status of the world's major flat-panel makers will deteriorate over the next two years because of massive capital spending and weakening profitability, Taiwan Ratings Corp (
Industry laggards such as Taiwan's Chunghwa Picture Tubes Ltd (
"Taiwan Ratings expects the financial flexibility of smaller Taiwan-based operators to be affected by the banking sector's reluctance to increase exposure to the TFT-LCD industry," Hsu said in the report.
The two companies, which have combined debt of more than NT$10 billion (US$304 million) maturing by the year-end, do not have enough capital yet, according to Taiwan Ratings.
"Demand for capital is expected to remain high over the medium term to fund new-generation plants; Taiwan Ratings expects the companies to continue to generate negative free operating cash flow over the medium term," Hsu said.
Hsu made the conclusion after reviewing the world's six major thin-film-transistor-liquid-crystal-display (TFT-LCD) manufacturers, including LG.Philips LCD Co and five local companies led by AU Optronics Corp (
The capital expenditures of the six companies more than doubled to US$12.9 billion last year, compared with US$5.1 billion in 2003, according to Taiwan Ratings.
In the medium term, LG.Philips is expected to maintain a better credit profile because of stronger profitability and its technological leadership in the boom-and-bust TFT-LCD industry, Hsu said.
AU Optronics and Chi Mei Optoelectronics Corp (奇美電子), Taiwan's two largest flat-panel makers, should be able to manage changes in the industry and capital needs, helped by good profitability and strong support from banks, he added.
The credit profile of AU Optronics would weaken in the wake of its acquisition of smaller rival Quanta Display Inc (
But, the merger with Quanta Display will boost AU Optronics' market share to around 21 percent this year, outpacing LG.Philips and Samsung Electronics Co, Hsu said.
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