Fri, Aug 01, 2008 - Page 12 News List

CMO to cut output 15 percent despite strong performance

By Lisa Wang  /  STAFF REPORTER

Chi Mei Optoelectronics Corp (CMO, 奇美電子), the nation’s second-biggest maker of liquid-crystal-display (LCD) panels, said its second-quarter earnings more than quadrupled, but the company planned to cut output this quarter by at least 15 percent to cope with fast declining demand.

The cut in production will be more drastic than bigger rivals AU Optronics Corp (友達光電) and LG Display Co Ltd, which plan to lower their equipment loading rate by 10 percentage points this quarter.

CMO was also conservative about future capacity expansion, president Ho Jau-yang (何昭陽) told investors yesterday.

“The investment for next year will be lower than this year,” Ho said.

CMO planned to spend NT$100 billion on equipment this year.

In the second quarter, net income jumped to NT$13.74 billion (US$448 million), or NT$1.88 per share, from NT$3.39 billion a year earlier, the company said in a statement. Gross margin improved to 22.3 percent last quarter from 15.2 percent.

After a year of profitability, “the golden era is about to end,” Ho said.

“In late June, the weakening global economy dealt a big blow to consumer confidence and consumer purchasing power,” Ho said. “We had expected the third quarter to be a traditionally high season, but now it may be the opposite.”

Early this year, most LCD panel makers and their customers had expected a shortage in the second half of the year.

With the slowdown, customers have hesitated to place more orders as inventories have been above normal levels, Ho said.

CMO did not rule out the possibility of cutting production more than 15 percent, Ho said.

The average price for CMO’s computer and TV LCD panels may decline as much as 5 percent in the third quarter from US$164 per unit last quarter, Ho said. The price dropped 7.2 percent last quarter.

Ho hoped that panel prices would hold steady next month after major panel suppliers cut production in a bid to ease oversupply.

“We have begun seeing a slight recovery now. July should be the bottom,” Ho said.

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