AU Optronics Corp (AUO, 友達光電) yesterday said the recent industry slowdown, primarily caused by the faltering Chinese economy, is much milder than the last slump during 2008-2009 global financial crisis and the company is well-prepared to ride out the downturn.
The last industry downcycle, which saw weak demand and a price crunch, brought the nation’s major LCD panelmakers to the verge of bankruptcy, as they were unable to generate sufficient cash to repay piling debts.
“Recent global economic weakness hurts demand for consumer electronics and flat panels, meaning that we will not experience strong seasonal demand as usual in the second half,” AUO chairman and chief executive officer Paul Peng (彭双浪) told reporters on the sidelines of the annual Touch Taiwan display show in Taipei.
“What is different this time is that shipments did not plunge as deep [as people thought]. Decline in exports [mostly] reflects a price drop,” Peng said.
“The Chinese stock market rout is a short-term phenomenon. Unless the market correction lasts for a longer period of time, it will not divert consumer spending,” he said.
Currently, TV panel inventory in the supply channel is one to two weeks higher than the normal level, AUO said.
Those stockpiles could return to normal by the year end and new orders might come in after that, the nation’s No. 2 LCD panelmaker said.
Peng said the company has improved its financial structure over the past three years, thanks to strong profitability, lower debt ratio and reduced depreciation costs.
The company’s debt ratio fell to 19.9 percent at the end of last quarter, from 51.3 percent a year earlier, according to the company’s financial statement.
Some industry watchers have said that more consolidation efforts are needed in Taiwan’s flat-panel industry in order to cope with increasing global competition.
Peng said AUO is open to possibilities, but the company is not in any merger and acquisition talks at the moment.
“What synergy a merger and acquisition deal would bring is our main consideration,” Peng said.
Compared with AUO’s cautious outlook, Innolux Corp (群創) is more optimistic.
“Orders for TV panels are quite brisk. We are seeing good order momentum through end of the year,” Innolux deputy director Eddie Kuo (郭正夏) said.
“We still see seasonal demand during China’s national holidays beginning in early October,” he said.
The company is facing smaller impact from the downturn than its peers, as it does not produce 32-inch TV panels, Kuo said.
A glut in the supply of 32-inch TV panels has caused prices to decline significantly, especially after Chinese panelamkers such as BOE Technology Group Co (京東方) recently began operating their new 8.5-generation plants, Kuo said.
Overall, Innolux’s factories are fully utilized this quarter, he said.
At the display fair, Innolux showcase its latest 65-inch 8k super-ultra-resolution TV panel.
The company said it is in talks with Japanese TV brands and China’s top 10 TV vendors to supply the 65-inch 8k TV panels.
Innolux is scheduled to ship its first batch of 65-inch 8k TV panels in the third quarter of next year and plans to produce bigger screens of 8K TV panels ahead of the summer Olympics in Tokyo in 2020.
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