Chimei Innolux Corp (奇美電子), the nation’s biggest LCD panel maker, yesterday reported larger-than-expected losses for the second quarter as a fragile global economic recovery curtailed TV and PC demand, which led to oversupply and a decline in panel prices.
In response to a more volatile market situation, Chimei cut its capital spending plans yesterday. Instead of a 30 percent reduction announced in June, the company said it plans to slash between 40 percent and 50 percent of its capital spending this year to between NT$50 billion (US$1.7 billion) and NT$60 billion, from the NT$100 billion estimated at the beginning of the year.
“We are cautious about new capacity expansion because the industry needs to control panel supply,” financial executive Eddie Chen (陳彥松) told investors during a teleconference.
However, he said the company would continue investing in key technologies, such as touch sensors, high-resolution panels and tablet screens.
During the April-to-June quarter, losses narrowed slightly to NT$13.01 billion, the fourth straight quarterly loss, from losses of NT$13.8 billion in the first quarter after the average panel price fell almost 6 percent quarter-on-quarter, according to the company’s financial statement.
The quarterly losses were deeper than the expectations of some analysts, including Daiwa-Cathay Capital Markets Co’s (大和國泰) Chris Lin (林首男).
Lin had expected Chimei to post losses of NT$11.1 billion in the second quarter. He downgraded his rating on Chimei to “hold” from “outperform.”
The Miaoli County-based company made net profits of NT$9.54 billion in the second quarter of last year.
This quarter, because of the teetering recovery in the US and eurozone, “demand looks sluggish in the third quarter, which should be the high season for the industry, and channel inventory is higher [than normal levels],” Chimei president Wang Jyh-chau (王志超) said.
Chimei would not rule out lowering its factory usage to cope with sluggish demand and weak panel prices, Wang said.
“The market situation changes swiftly,” he said.
Factory utilization rose to about 80 percent last quarter, the company said.
Shipments of computer panels are expected to be flat from last quarter, while TV panel shipments would decrease by low a single-digit percentage, the company said.
Chimei shipped 35.47 million computer and TV panels last quarter, up about 10 percent from 32.27 million in the first quarter.
Shipments of flat panels used in smartphones and tablet devices are expected to grow by a double-digit percentage this quarter on improving yields. The company shipped 95 million units in the first three months.
In a significant change of strategy, Chimei said it was refocusing on its LCD manufacturing business and it would streamline its LCD monitor assembly business, which delivered a stable gross margin, but yielded a smaller return and used a lot of resources.
In June, Chimei said it would concentrate on its core business of LCD panel manufacturing after it failed to reach an agreement with its major shareholder, Hon Hai Precision Industry Co Ltd (鴻海精密), on separating its touch and small and medium-sized flat panels businesses because of higher demand in the smartphone and tablet market.