AU Optronics Corp (友達光電), the world's third-largest maker of flat-display panels for computers and televisions, yesterday unexpectedly lowered this year's financial forecast by a third, saying overcapacity-driven price decline is eroding profits.
The company revised downward its full-year earnings target for this year to NT$29.1 billion, or NT$6.07 per share, from NT$41.6 billion estimated in April. Revenue forecast will also slide to NT$162.4 billion from NT$186.97 billion.
"This is the fourth downcycle we experienced since we entered the flat-panel display business eight years ago," chairman Lee Kun-yao (李焜耀) told investors. "The trough came so swiftly as prices slid at a pace faster than we have expected."
The quick change would drag AU Optronics into a small loss in the fourth quarter of the year, Lee said, without elaborating.
In the June to September period, prices for large-sized liquid-crystal-display (LCD) panels have skidded over 30 percent, mostly due to price manipulation and speculation of lower panel prices in supply channel amid a supply glut, Lee said.
"But, we feel the prices are falling at a slower pace in the fourth quarter," Lee said.
He expected prices to trend lower by another 5 percent in the final quarter of the year, from the level late last month, when the price of 17-inch LCD panels fell to around US$175 apiece.
"It is really a shock. I didn't expect AU Optronics to suffer a loss that soon, despite a significant setback in earnings last quarter," said Ken Yu (余文耀), an analyst with SinoPac Securities Corp (建華證券).
no defense
Since first-tier AU Optronics could not withstand the price erosion, Chi Mei Optronics Corp (
Last week, a smaller rival HannStar Display Corp (瀚宇彩晶) axed its financial forecast by nearly 70 percent, citing mounting inventory and non-stop price decline.
HannStar Display said pre-tax profits will reduce to NT$3.07 billion from NT$9.2 billion projected in April. Revenue will drop 33 percent to NT$40.05 billion from a previous estimate of NT$60.25 billion.
As panel supply is still ahead of demand, AU Optronics said it plans to scale back the monthly capacity of its advanced generation-six plant by 30 percent.
The company's sixth-generation (G6) fab will start mass production in the first quarter next year as scheduled, but this factory will only produce 60,000 glass substrates, rather than 90,000 units, said AU Optronics president Chen Hsuen-bin (
In addition, AU Optronics will start to build a new fifth generation (G5) plant in Taichung in res-ponse to slow demand for pricey flat-screen TVs, while keeping the planned generation-seven fab on hold, Chen said.
The spending on new facilities for next year will fall in a range between NT$70 billion and NT$80 billion, down from the planned NT$85 billion this year, the company said.
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