Innolux Corp (群創) yesterday said it swung into a quarterly net profit of NT$3.06 billion (US$96.72 million) last quarter, ending three quarters of losses as strong holiday shopping demand drove TV panel prices higher.
That reversed a quarterly loss of NT$3.48 billion in the second quarter, company statistics showed.
Innolux is the nation’s largest LCD panel supplier. It is controlled by Hon Hai Precision Industrial Co (鴻海精密).
In the July-to-September quarter, the average selling price of panels used in PCs and TVs rose 14 percent from the previous quarter to US$330 per square meter. The price hikes also helped boost Innolux’s gross margin from 2.3 percent in the second quarter to 11.8 percent last quarter.
“In the third quarter, TV demand was quite good in almost all markets, except Europe,” said Innolux vice president Jemmy Hung (洪茂盛), who is in charge of its TV panel business.
“The trend toward large-sized TVs accelerated panel consumption and caused panel supply shortages,” Hung told investors in Taipei.
He said that order visibility was clear.
“Innolux is optimistic about the market demand this quarter and in 2017,” Hung said.
“There is just not enough capacity to cope with growing TV replacement demand for 40-inch displays,” he said.
Innolux said that supply constraints this quarter should still be in place in all segments, from TVs and notebook computers to mobile phones.
As a result, equipment utilization at production lines will stay fully loaded this quarter, the company said.
However, shipments of panels will remain flat from last quarter, capped by insufficient capacity, the company said.
No new capacity would be available from Innolux until January, when a new 8.6-generation factory begins operations, the company said.
Innolux plans to use the new factory to produce 50-inch and 58-inch panels for TVs.
Global demand for TV panels is expected to grow by 7 to 8 percent annually next year, but the increase in panel supply will be slower than demand growth, Hung said.
Panel supply shortage has led to upward adjustments of prices and the situation will continue through next year, Innolux said.
Average selling prices for PC and TV panels are to rise by double-digit percentage points from last quarter, while prices for small and medium-sized panels for handsets will go up by a mid-to-high single-digit percentage point, the company said.
“Supply is so tight that customers have to pay in advance to secure capacity,” said Innolux vice president Jeffrey Yang (楊弘文), who is in charge of mobile device panels. “Prices are still trending up now and hikes might extend into next year.”
Innolux plans to spend between NT$40 billion and NT$42 billion this year on new facilities and equipment, with most of the funds used for an 8.6-generation plant in Miaoli County.
However, the company said it is cautious about investing in the production of large-sized high-definition organic LED (OLED) panels, although its South Korean competitors are developing such panels at the moment.
“Such an investment will be huge, while the risk will be high,” Hung said, adding that OLED panels are not cost competitive.
CIMB Securities Ltd said in a recent note that it will be hard for Taiwanese makers to stay competitive in the OLED market, because South Korean makers now have major control over the market, while Chinese firms are also participating.
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