Local LED product suppliers could post better-than-expected sales in the fourth quarter, as China will reportedly unveil another round of subsidies on energy-efficient home appliance purchases soon, analysts said yesterday.
In addition, with China’s Oct. 1 National Day vacation approaching, Chinese LED product buyers could start to build up their inventories in a bid to meet an expected buying spree during the holiday, they said.
They added that such positive leads from China are expected to help local LED product manufacturers to offset the impact of slow-season effects traditionally seen during the October-to-December period.
After China ended its past year-long program to provide subsidies on purchases on energy-efficient home appliances, including LED TVs, on May 31, demand for LED backlights has fallen sharply. As a result, it is unlikely that the LED business will benefit much from peak-season effects in the third quarter, analysts said.
According to the Industrial Economics and Knowledge Research Center (IEK), production value of Taiwan’s LED industry for the third quarter is expected to fall 4.9 percent from the second quarter to NT$24.5 billion (US$822 million), due largely to falling LED backlight demand.
Among the local LED firms, only Everlight Electronics Co (億光電子) outperformed its local peers to post a 10.14 percent month-on-month increase in consolidated sales last month to a new high of NT$2.41 billion. Analysts forecast Everlight to enjoy a 10 percent sequential rise in consolidated sales for the third quarter.
However, a new subsidy plan from China could spark demand for LED products again. According to a China Securities Journal report, the Chinese authorities will made public the new program next month. The report added that the plan is scheduled to be launched in January next year.
Ahead of the implementation of the new subsidy program, home appliance vendors are expected to restock their inventories in the fourth quarter, in expectation of a wave of strong buying starting from next year, analysts said.
Along with the new subsidy plan, China’s Oct. 1 National Day holiday is likely to prompt many consumers there to shop, a development that could boost sales of LED products, they said.
LEDInside, an LED market research group in Taipei, said some Chinese TV vendors have resumed buying LED products for TV production in hopes that they can gain the upper hand in competition during the upcoming holiday.
Two of Taiwan’s leading flat-panel makers are also expected to benefit from China’s new TV purchase subsidy program, as the move will lead to higher shipments of TV screens and stabilize product prices, Hua Nan Securities Co (華南永昌證券) analyst Stan Chang said.
The new TV purchase subsidy plan will focus on energy efficient TVs, a move which will benefit major panel suppliers to China, such as Innolux Corp (群創光電) and AU Optronics Corp (AUO, 友達光電), which possess advanced production technology, Chang said.
“Since China ended the last year-long TV purchase plan on May 31, TV panel prices have fallen steadily amid inventory adjustments. Once China starts another round of subsidy efforts, panel makers will become the major beneficiaries,” Chang said.
According to WitsView, a Taipei-based panel market research group, TV screen prices have fallen an average of between 3 percent and 4 percent per month since the beginning of the third quarter because of the expiration of the previous subsidy program in China.
“The falling TV prices have squeezed AUO and Innolux’s profitability. Though they are unlikely to fall into the red in the third quarter, I think their earnings in the quarter could be lower than in the second quarter,” Chang said. “The new subsidy plan could eliminate those negative pricing factors.”
Innolux posted a net profit of NT$4.07 billion for the second quarter, up more than 140 percent from the previous quarter, while AUO reported a net profit of NT$3.98 billion in the second quarter, compared with a net loss of NT$3.32 billion the previous quarter.