Fri, Apr 24, 2009 - Page 12 News List

AU Optronics sees losses narrow on improving demand

By Lisa Wang  /  STAFF REPORTER

AU Optronics Corp (友達光電), the world’s third-largest maker of liquid-crystal-display (LCD) panels, yesterday said quarterly losses narrowed in the first quarter as improving demand for TV sets helped stabilize panel prices.

The Hsinchu-based company said the nascent recovery could extend into this quarter and boost factory usage to nearly 100 percent.

Losses were NT$20.22 billion (US$598 million) in the quarter ending March 31, compared with NT$26.6 billion in the final quarter of last year, AU Optronics said, marking a second straight quarterly loss.

A year ago, AU Optronics earned NT$26.99 billion.

“We think the worst of the situation has passed and the company’s operation and revenues will improve month by month ... We now have strong confidence in the remaining months of the year,” company president Chen Lai-juh (陳來助) told an investors’ conference.

A recovery in demand was gradually taking hold as “rush orders are mostly the result of [upward] revisions by customers to their business plans for this year ... rather than simply inventory buildup,” Chen said.

This quarter, shipments of TV and computer panels may grow 50 percent from 13.1 million units in the first quarter, helped in part by China’s plan to subsidize purchases of home appliances in rural areas, AU Optronics said.

“We are seeing orders and demand increase, primarily from North America and emerging markets such as China, Brazil and Southeast Asian countries,” Paul Peng (彭雙浪), a vice president of AU Optronics, said on the sidelines of the conference.

Reflecting the rebound in demand, the company’s factory utilization rate may approach 100 percent this quarter, compared with 65 percent in the first quarter, it said, catching up with South Korean rival LG Display Co, which projects utilization to rise from 80 percent to 93 percent.

“AU Optronics gave surprisingly good guidance in terms of shipment growth and equipment utilization rate,” said Jeff Pu (蒲得宇), a panel industry analyst with Yuanta Securities (元大證券).

“But we are concerned that a significant increase may be driven mostly by inventory stocking rather than a strong recovery in end demand. Expanding [production] capacity too much could cause a renewed inventory problem in the third quarter, stifling the budding rise in prices,” Pu said.

He retained a “hold” rating on shares of AU Optronics.

Panel prices may climb between 5 percent and 7 percent quarter-on-quarter in the second quarter after average selling prices for TV and PC panels held steady at US$97 per unit last quarter, AU Optronics said.

To cope with fresh demand, AU Optronics planned to start producing panels at a new 8.5-generation plant one month ahead of schedule, Chen said.

To fund capacity expansion, AU Optronics yesterday raised its capital budget for this year from NT$50 billion to NT$60 billion.

Shares of AU Optronics jumped 2.47 percent to NT$35.25 yesterday, while rival Chi Mei Optoelectronics Corp (奇美電子) advanced 3.24 percent to NT$19.1.

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