AU Optronics Corp (友達光電), the world's third-largest flat-screen maker, announced yesterday that its quarterly profits jumped nearly fivefold on better cost efficiency, but investors worried that lower panel prices would slow the growth.
During the quarter that ended last month, profits climbed to NT$14.39 billion (US$425 million), up from NT$2.9 billion a year ago, which propped up the company's first half earnings to NT$26.05 billion, or NT$5.59 per share.
The second-quarter results slightly exceed the NT$13.43 billion forecast by Merrill Lynch, which downgraded its recommendation for AU by two notches to "Sell," saying that steeper price fall could throw the industry into a reverse.
"We did see some signs pointing to slow demand since late June as channel distributors became inactive on inventory buildup," Lee Kuan-yao (李焜耀), chairman of AU Optronics, told investors during a conference yesterday.
"But we feel this should be a result of seasonal factors, rather than [an indication that] the industry's tilting toward unhealthy development," he added.
"After one-and-a-half-years of price hikes, it should be time to lower prices of computer monitors in order to level off inventories," Lee said.
In addition, AU will cut back production to help ease its inventory pressure, Lee said. AU's invenotries swelled to some NT$17.78 billion in the second quarter, up 44 percent from NT$12.36 billion in the first quarter.
Sales of liquid-crystal-display (LCD) panels for computer monitors made up 65 percent of the Hsinchu-based company's total revenue of NT$48.53 billion in the second quarter.
AU expects a 10-percent price decline for large-sized panels during the July-September quarter on a quarterly basis.
But, industry analysts expected panel prices to fall significantly.
"The price drop will be much deeper. Say, 17-inch LCD screens are likely to fall by 23 percent to US$225 a unit," said Frank Su, an analyst with BNP Paribas Peregrine in Taipei.
Despite the falling panel prices, AU chief financial officer Max Cheng (鄭煒順) said "We'll take on the challenge to control the gross margin to dropping less than 10 percent."
In the last quarter, AU's gross margin inched up 1.3 percent to 35.3 percent from 34 percent from the previous quarter.
With gross margin sliding, the firm is expected to post a quarter-on-quarter 30 percent decline in earnings to NT$9.39 billion in the quarter to September, according to Merrill Lynch.
South Korean rival LG.Philips LCD, a 50-50 joint venture between LG Electronics Inc and Philips Electronics NV, said second-quarter profits more than tripled to 701 billion won (US$20.75 billion) from 183 billion won a year ago.
Looking ahead, Lee said the strength of the demand for flat-screen televisions, which heavily consume LCD makers' capacities, will be a determining factor to divert a supply glut next year.
"We believe 2005 will be the year for LCD TVs to take off as the pricey sets will become more acquisitive when the retail price for a 32-inch set fall to acceptable US$1500," Lee said.
AU expects sales from TV panels to make up to 20 percent of its revenue next year, from the current 7 percents.
"But, Lee's remarks do not sound convincing to me. The concern over a supply glut hurting panel prices and eroding profits has not been alleviated at all," Su said.
AU shares have plunged 20 percent since the beginning of this month. It fell 2.66 percent to NT$40.3 on the TAIEX yesterday.
SEEKING CLARITY: Washington should not adopt measures that create uncertainties for ‘existing semiconductor investments,’ TSMC said referring to its US$165 billion in the US Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) told the US that any future tariffs on Taiwanese semiconductors could reduce demand for chips and derail its pledge to increase its investment in Arizona. “New import restrictions could jeopardize current US leadership in the competitive technology industry and create uncertainties for many committed semiconductor capital projects in the US, including TSMC Arizona’s significant investment plan in Phoenix,” the chipmaker wrote in a letter to the US Department of Commerce. TSMC issued the warning in response to a solicitation for comments by the department on a possible tariff on semiconductor imports by US President Donald Trump’s
‘FAILED EXPORT CONTROLS’: Jensen Huang said that Washington should maximize the speed of AI diffusion, because not doing so would give competitors an advantage Nvidia Corp cofounder and chief executive officer Jensen Huang (黃仁勳) yesterday criticized the US government’s restrictions on exports of artificial intelligence (AI) chips to China, saying that the policy was a failure and would only spur China to accelerate AI development. The export controls gave China the spirit, motivation and government support to accelerate AI development, Huang told reporters at the Computex trade show in Taipei. The competition in China is already intense, given its strong software capabilities, extensive technology ecosystems and work efficiency, he said. “All in all, the export controls were a failure. The facts would suggest it,” he said. “The US
The government has launched a three-pronged strategy to attract local and international talent, aiming to position Taiwan as a new global hub following Nvidia Corp’s announcement that it has chosen Taipei as the site of its Taiwan headquarters. Nvidia cofounder and CEO Jensen Huang (黃仁勳) on Monday last week announced during his keynote speech at the Computex trade show in Taipei that the Nvidia Constellation, the company’s planned Taiwan headquarters, would be located in the Beitou-Shilin Technology Park (北投士林科技園區) in Taipei. Huang’s decision to establish a base in Taiwan is “primarily due to Taiwan’s talent pool and its strength in the semiconductor
French President Emmanuel Macron has expressed gratitude to Hon Hai Precision Industry Co (鴻海精密) for its plan to invest approximately 250 million euros (US$278 million) in a joint venture in France focused on the semiconductor and space industries. On his official X account on Tuesday, Macron thanked Hon Hai, also known globally as Foxconn Technology Group (富士康科技集團), for its investment projects announced at Choose France, a flagship economic summit held on Monday to attract foreign investment. In the post, Macron included a GIF displaying the national flag of the Republic of China (Taiwan), as he did for other foreign investors, including China-based
RSS