Chi Mei Optoelectronics Corp (
The Tainan-based flat-panel maker said the second-quarter loss contracted by 44 percent to NT$944 million (US$28.97 million), or NT$0.22 per share, compared with a greater loss of NT$1.7 billion, or NT$0.35 a share, a year earlier during the last trough.
"We had expected strong demand [for LCD televisions] in Europe, but [the actual demand] fell short of our estimate," president Ho Jau-yang (
Disappointing demand coupled with a supply glut caused prices of computer and TV screens to decline drastically by around 25 percent to 30 percent in the second quarter, rather than the 5 percent to 10 percent Chi Mei had estimated in April, according to the company.
"After the slow second quarter, we clearly see a strong recovery on the horizon," Ho said. "Market demand is picking up and prices are also stabilizing ... Prices for certain computer monitors already started to rise last month," he added.
Benefiting from improving demand, Chi Mei expected shipments to grow by more than 20 percent quarter-on-quarter during the July to September period.
The average selling price for TV panels would rebound by a single-digit percentage this quarter from last quarter, as the company expected to sell more panels measuring 42 inches and above, while prices for computer panels would slide by a further single-digit percentage, Ho forecast.
Analysts like Frank Wang (
However, Wang, who tracks the flat-panel industry for Morgan Stanley in Taipei, said the worst was yet to come, as he expected Chi Mei's losses to widen for the current quarter because panel prices were recovering only moderately.
"Inventory is still a concern," Wang said.
Chi Mei's second-quarter results were slightly better than Wang's estimate of a NT$1.09 billion loss.
Chi Mei said it planned to significantly reduce inventory to around NT$20 billion in the third quarter from NT$26.63 billion in the second quarter and to further reduce the supply glut by the end of the year.
Inventory was about NT$15 billion during the second quarter of last year and NT$21.5 billion in the first quarter of this year.
To better manage its inventory in the boom-and-bust LCD industry, Chi Mei was considering slowing its capacity expansion by trimming capital expenditure from NT$100 billion this year to around NT$70 billion to NT$80 billion next year.
Rival AU Optronics Corp (友達光電) said last month that it planned to cut its spending on new equipment for next year by between 30 percent and 40 percent.
However, Chi Mei still plans to go ahead with the construction of its first sixth-generation plant for the manufacture of 32-inch and 37-inch TV panels to improve its product portfolio. The plant is scheduled to start mass production by the end of next year.
AU Optronics said on July 25 it eked out net profits of NT$182 million, or NT$0.03 per share, in the second quarter.
Shares of Chi Mei fell 0.13 percent to NT$39, while AU Optronics shares advanced 1.12 percent to NT$49.75 on the Taiwan Stock Exchange yesterday.