Fri, Mar 11, 2011 - Page 12 News List

Chimei Innolux posts NT$24 billion loss

EROSION:The quarterly loss exceeded the LCD panel maker’s losses for all of last year. It is also mulling spinning off its touch and handheld-device panel manufacturing segments

By Lisa Wang  /  Staff Reporter

Chimei Innolux Corp (奇美電子), the nation’s biggest LCD panel maker, yesterday posted widening losses for last quarter because of price erosion and a penalty provision from an anti-trust lawsuit in Europe.

Losses ballooned to NT$24.13 billion (US$818 million) last quarter, compared with NT$3.64 billion in the third quarter of last year, after oversupply drove down the average selling price of television and computer panels by 12.38 percent to US$99 per unit. Gross margin dipped to minus 7.4 percent last quarter from 2.7 percent in the prior quarter.

The losses included a -provision of NT$6.7 billion for anti-trust--related expense, which is part of a 300 million euro (US$415 million) penalty levied by the European Commission for alleged price-fixing.

For all of last year, Chimei lost NT$14.84 billion.

Chimei also confirmed yesterday that it was studying the feasibility of spinning off its touch and handheld-device panel manufacturing divisions to create two new companies for possible listings on the local bourse, Chimei chief executive Tuan Hsing-chien (段行建) told investors in a teleconference.

The spin-off plan comes amid Chimei’s dealing with the -integration of the three-way merger between Innolux Display Corp (群創光電), Chimei Optoelectronics Corp (奇美電子) and TPO Display Corp (統寶光電) that took place in March last year.

“We hope to separate [the divisions] as soon as possible ... Our product portfolio is too complicated ... The spin-off will help us enhance operation efficiency,” Tuan said. “Besides, we can raise funds from the capital market at a lower cost as the [touch] market is sizzling.”

The company’s handheld-panel manufacturing division, which makes screens for smartphones and tablets, accounted for 22 -percent of Chimei’s overall revenues of NT$130.39 billion last quarter, while the touch-panel business still made a very minimal portion, the company said. TV and PC LCD panels made up a big chunk of 74 percent.

“The spin-off will help speed up development of Chimei’s touch and handheld-device panel businesses as Hon Hai Group (鴻海集團) wants,” said Roger Yu (游智超), an analyst with Polaris Securities Co (寶來證券).

The group’s flagship company, Hon Hai Precision Industry Co (鴻海精密), which assembles Apple Inc’s iPhone and iPad devices, needs to expand touch panel and touch sensor capacity to cope with growing customer demand.

“But the separation is likely to reduce investors’ interest in buying Chimei, as its fast-growing touch panel business is more appealing to them. Meanwhile, growth for TV and PC panel businesses will be quite limited in the future,” Yu said.

Commenting on next quarter’s outlook, Tuan said: “There will be a slight improvement in PC [panel demand] in the second quarter. And [demand for] TV [panels] will slide a bit as demand in Europe is still weak.”

Revenues would grow this quarter from last quarter, company financial executive Eddie Chen (陳彥松) said.

Tuan pinned his hopes on a significant improvement in the company’s profitability in the third quarter, as the effect of the three-way merger would magnify after prolonged integration.

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