Local liquid-crystal-display (LCD) panel supplier HannStar Display Corp (瀚宇彩晶) yesterday posted second quarter earnings showing a 67 percent gain on rising prices, but said it expected a drastic slowdown in demand will drive prices lower by 10 percent to 15 percent this quarter.
The Taoyuan-based panel supplier said it did not expect a significant recovery soon, citing a slowing global economy, which has stifled demand. Despite the arrival of the downcycle, HannStar did not plan following major players’ plans to reduce output to ease oversupply.
“We do not feel any pressure to lower equipment loading ... We will run our factory at full capacity,” company president David Chou (周定輝) said at a teleconference with investors.
Shipments may remain flat this quarter, compared with 4.9 million units shipped in the second quarter, Chou said.
Net income expanded to NT$2.41 billion (US$78.7 million), or NT$0.47 per share, in the second quarter, compared with NT$1.44 billion, or NT$0.24 per share, during the same period last year.
Average selling price (ASP) improved to US$130 per unit last quarter from US$123 a year earlier. This quarter, ASP may fall by 10 percent to 15 percent amid diminishing demand, Chou said.
To safeguard its profitability, HannStar is aggressively shifting its capacity to better-margin medium-sized LCD panels primarily used in low-cost laptops and digital photo frames, the company said.
HannStar currently generates more than 90 percent of its NT$20.45 billion in revenues from selling computer panels to customers including South Korean rival LG Display Co.
HannStar aims to ship 5 million medium-sized panels this quarter, a big jump from 2 million units in the prior quarter.
“HannStar made a correct choice by changing its product strategy. The company would have lost competitiveness as bigger competitors are making computer panels at less costly plants,” said Jeff Pu (蒲得宇), a panel industry analyst with Yuanta Securities (元大證券).
The company only operates a 5.3-generation plant after selling two less advanced plants to local mobile phone panel supplier Wintek Corp (勝華科技) to improve its financial structure.
“I think it will be easier for a small company like HannStar to weather the new downcycle than its peers, as HannStar has a healthier financial structure and it will not be under as much heavy pressure to sell its panels as big rivals,” Pu said.
Pu suggested, however, that investors not to buy any flat panel stocks at this point as not a single panel supplier would be able to escape the impact of the latest downcycle.
HannStar’s gross margin may halve to around 10 percent this quarter, compared to 22 percent last quarter, Pu said.
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