AU Optronics Corp (AUO, 友達光電), the nation’s No.2 LCD panel maker, yesterday said it planned to slash capital spending by almost 30 percent this year after reporting its third straight quarterly losses on sluggish demand for slim-screen televisions.
The company also gave a gloomy outlook for the second half of this year.
“As [customer’s] inventory digestion will extend into the current quarter, we expect that seasonal [demand] will not be as evident as it used to be,” AUO executive vice president Paul Peng (彭雙浪) told an investors’ conference.
“The visibility is quite low,” Peng said. “Rush orders are trickling in, instead of customers placing bigger orders all at one time.”
To cope with dwindling demand and oversupply, AUO has decided to cut spending to less than NT$70 billion (US$2.43 billion) this year, compared with the originally planned NT$95 billion.
As a result, AUO would have to put off a plan to ramp up its second 8.5-generation production line in Taiwan as well as a plan to jointly build a new factory in China with Chinese firm Longfei Optoelectronics Co (龍飛光電), the company said.
This has made AUO the latest in a slew of electronics companies to cut their budgets for new equipment this year.
AUO’s bigger rivals, LG Display Co of South Korea and Taiwan’s Chimei Innolux Corp (奇美電子), have recently announced cuts of 18 percent and 30 percent respectively.
“It is good for AUO to cut capital spending to reduce operational risk, but that will not be enough to help AUO turn around by the end of this year as demand is -really weak,” Roger Yu (游智超), an LCD industry analyst with Polaris Securities Co (寶來證券), said by telephone.
Last quarter, AUO’s losses improved at a slower-than--expected pace to NT$10.77 billion, from losses of NT$13.9 billion in the first quarter, after the price of television panels dropped 2 percent quarter-on-quarter as demand sagged in Europe and the US amid a wobbling economic recovery, according to AUO’s financial statement.
The Hsinchu-based company made net profits of NT$11.25 billion a year ago.
Slow demand for LCD televisions, mostly in Europe, has prompted AUO to revise down its forecast for global LCD television shipments to 210 million units this year, from a previous estimate of 215 million units.
It also meant global LCD television shipments would grow less than 10 percent this year from 192 million units last year, rather than a previous estimate of a 12 percent increase.
To tighten inventory control, AUO plans to reduce factory utilization to 80 percent this quarter, from 83 percent last quarter.
Shipments of televisions and PC LCD panels are expected to grow by a low single-digit percentage this quarter from 29.6 million units last quarter.
Prices for television panels are expected to rise by a high single-digit percentage from the last quarter, helped by the sales of new panels with 3D and touch-screen features, while the price for PC panels would be little changed.
TV panels accounted for the biggest portion, 45 percent, of AUO’s overall revenues of NT$98.05 billion last quarter.
AUO’s stock price tumbled about 24 percent in the second quarter, while the benchmark TAIEX edged lower by 0.3 percent during the same period.