The recovery of Taiwan's flat-panel display market hinges on the Christmas buying season, AU Optronics Corp's (友達光電) chairman Lee Kun-yao (李焜耀) said yesterday, but if prices continue to fall, some local players might disappear.
"There are too many players in the Taiwan industry. Perhaps next year there will be more consolidation," Lee said at the company's third-quarter investor conference.
Local press have speculated that AU Optronics is interested in merging with Quanta Display Inc (廣輝電子), another top five TFT-LCD panel manufacturer. When questioned about this during the conference, Lee did not rule out the possibility, but refused to confirm the rumor.
AU Optronics made NT$870 million in profit in the third quarter, down almost 78 percent on the second quarter, but well up on last year's loss of NT$2.267 billion for the same quarter. Chairman Lee Kun-yao signaled a turnaround in AU Optronics' fortunes, claiming new orders for the fourth quarter.
However, the company's CEO Max Cheng (鄭煒順) revised the company's 2002 net income forecast down almost 60 percent to just NT$6 billion from NT$14.6 billion, which amounts to an expected loss in the fourth quarter.
If there is indeed going to be consolidation, Quanta is the first candidate, analysts say. "I personally feel that someone will face pressure to consolidate with others next year, perhaps the first will be Quanta Display," said Frank Su (蘇穀祥), LCD analyst at BNP Paribas Taiwan.
AU Optronics is the largest maker of TFT-LCD panels in Taiwan according to international market research firm, Displaysearch. It takes third place globally after Korean rivals Samsung Electronics Co and LG Philips LCD.
The market has suffered from an oversupply of products over the last two quarters -- by as much as 10 percent last quarter according to Display Search -- which has driven the average selling price of a typical 15-inch TFT-LCD panel down by more than a quarter since the summer. Today a 15-inch panel will fetch around US$190 wholesale.
And the downward pressure will increase into next year, analysts say. "With fifth-generation products from Korea and high inventory at other Taiwan producers, prices will continue to drop even if shipments rise by as much as 10 percent, as AU suggested," said Debbie Wu (吳岱玲), TFT-LCD analyst at Yuanta Core Pacific Securities Co (元大京華證券).
Lower prices would normally fuel consumer demand, but this has not materialized yet. "I don't think there will be new demand powered by lower prices as we have had a lower price for months and demand has not picked up so far.
"When LG and AU ramp up their fifth-generation production in the second quarter of 2003, I forecast that the price of panels will drop to US$150," Wu said.
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