AU Optronics Corp (AUO, 友達光電) yesterday reduced its capital spending for this year by 20 percent after posting deeper quarterly losses for last quarter amid sluggish demand for TV panels due to a US-China trade dispute and pricing pressure from rivals.
It expects unbalanced supply and demand dynamics to persist as Chinese peers substantially ramp up new production, while macroeconomic uncertainties might weigh on the industry amid a slow season this quarter, the LCD panel maker said.
To cope with the unfavorable environment and financial hardship, it would reduce factory utilization to below last quarter’s 90 percent, following in the steps of its South Korean and Chinese peers, AUO said.
“It is normal to adjust [factory utilization] flexibly in accordance with market changes,” AUO chairman Paul Peng (彭雙浪) told a teleconference.
The economic factor “has dealt a blow to the sales of consumer electronics this year, which has curbed demand for TVs and other consumer electronics, and pushed [supply chain] inventory higher,” Peng said.
Furthermore, “irrational competition [from China] has caused a drastic decline in [TV] panel prices, particularly in the third quarter. [Price] decline in the third quarter was more dramatic compared with the past three quarters,” he said.
The company said it would austerely control spending, including capital expenditures, to strengthen its cash flow.
AUO plans to spend NT$32 billion (US$1.05 billion) on new equipment this year, compared with NT$40 billion it estimated three months ago.
Revenue is expected to decline this quarter from last quarter’s NT$70.05 billion as the company said shipments of TV and PC panels would fall about 15 percent quarter-on-quarter.
Average selling prices is expected to decline at a quarterly rate of 5 percent and shipments of small and medium-sized panels are expected to fall by a high-single-digit percentage, it said.
AUO said losses in the third quarter widened to NT$3.99 billion from losses of NT$2.68 billion in the second quarter.
It was the company’s third quarterly loss in a row. It made net profit of NT$4.32 billion a year earlier.
AUO said demand fell short of its expectations, with shipments of TV and PC panels falling 5.5 percent quarterly to 28.7 million units, rather than the flat performance it had expected.
The average selling prices of the company’s products dropped 3.41 percent to US$312 per square meter from US$323 in the prior quarter, while gross margin fell to minus-0.4 percent, compared with 2.8 percent a quarter earlier and 10.7 percent a year earlier.
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