Shares of AU Optronics Corp (AUO, 友達光電) and Innolux Corp (群創光電), two of Taiwan’s leading flat-panel makers, moved lower yesterday morning on declining TV panel prices, dealers said.
Foreign institutional selling in the two stocks on Tuesday dampened market sentiment toward their prospects amid concerns that the weakness in pricing power will erode their profitability, they said.
Shares of AUO and Innolux fell 1.62 percent and 1.84 percent to NT$9.11 and NT$10.65 respectively yesterday. The weighted index on the Taiwan Stock Exchange (TWSE) was up 0.3 percent.
“It was no surprise that investors rushed to dump the two stocks this morning after flat-panel prices continued to fall in the second half of January [from the first half],” Asia Securities Investment Consultant (亞洲投顧) analyst Chang Chih-cheng (張智誠) said.
In a research note released on Tuesday, flat-panel market advisory firm DisplaySearch said prices of 40 to 50 inch TV panels fell US$2 to US$4 in the second half of January from the first half of the month because of escalating competition.
WitsView, another flatscreen research organization, predicted shipments of LCD TVs in the current quarter, traditionally a slow season for the sector, will drop about 26 percent from the previous quarter, depressing prices even further. It also warned of a pending supply surfeit as Chinese competitors gear up to launch 8.5 generation plants, which focus on the manufacturing of large-sized screens. TV panels account for big shares of the two companies’ revenues, so assessments on TV shipments hurt investor confidence in the stocks, dealers said. In the third quarter, TV panels accounted for 44 percent of AUO’s sales and 45 percent of Innolux’s sales.
“Seeing the weakening pricing power, foreign institutional investors sold off AUO and Innolux shares yesterday, prompting other investors to dump the two stocks today,” Chang said.
According to the TWSE, foreign institutional investors sold a net 1.71 million AUO shares and a net 22.44 million Innolux shares on Tuesday. AUO’s US depositary receipts fell 0.98 percent on Wall Street overnight.
“If there is a silver lining, it’s that AUO is devoting more effort to produce small and medium-sized panels to tap the still booming smartphone and tablet markets in a bid to offset the impact of falling TV screen prices,” Chang said.
AUO announced last week that it would build a sixth generation plant in Kunshan, China, to accommodate growing demand for non-TV panels. It said the plant, planned to begin operations in 2016, will be equipped to produce high-end flat panels using advanced low-temperature polycrystalline silicon technology.