AU Optronics Corp (AUO, 友達光電), the world’s third-largest maker of flat panels, posted the weakest quarterly net profit in six quarters as corporations and consumers tightened spending on PCs and slim-screen TVs.
Net income plunged 96 percent to NT$860 million (US$25.83 million) in the July-September quarter, from NT$22.57 billion a year earlier. It was the lowest level since the second quarter of last year, during which the company made NT$5.92 billion, AUO said in a statement.
“We are not sure how long it will take for the industry to pick up from the U-shape trough. But, we are taking actions against this downturn,” vice chairman Chen Hsuen-bin (陳炫彬) told investors.
AUO plans to cut its capital spending for this year and next year by a combined 20 percent to less than NT$200 billion by pushing back the start of mass production of a new advanced line by one year to 2010, joining bigger rival LG Display Co Ltd’s step of slowing capacity expansion.
LG Display said earlier this month that it planned to more than halve its capital spending next year.
“AU Optronics’ reduction [in new spending on equipment] is bigger than I thought,” said a senior technology analyst with Macquarie Securities Ltd’s Taiwan branch who asked not to be named.
“That could lead to a supply shortage in the second half of next year when demand comes back, though the move may ease glut in the short run,” he said.
Macquarie had expected AUO to spend as much as NT$240 billion on capacity expansion this year and next. AUO also beat most overseas investors’ forecast of multibillion dollar losses. Macquarie has projected that the panel maker would have made more than NT$3 billion in losses.
In the third quarter, the average selling price for liquid-crystal-display (LCD) panels dropped 21 percent from last year to an average US$137 per unit, which drove gross margins down from 23 percent a year ago to 8 percent, as the weakening global economy reduced consumer consumption.
The firm said the fourth quarter could be a tougher period, citing vague prospects for new orders. Customers were conservative about Christmas holiday sales and more unwilling to build up inventories before the traditionally shopping season, it said.
To cope with the new industry slowdown, AU Optronics planned to lower its equipment loading rate by another 10 percentage points to 70 percent from 80 percent in the third quarter after a 10 percentage point drop.
“[Demand] looks not so good in the fourth quarter. We will follow our consistent policy of strictly controlling inventory as we used to do,” Chen said.
Reflecting lower factory usage, shipments of PC and TV panels may fall by 5 percent to 9 percent this quarter, from 20.72 million units in the third quarter, with TV panels making up almost half of the shipments, the company said.
Price for LCD panels used in PCs and TVs may drop by up to 13 percent quarter on quarter, it said.
Shares of AU Optronics shares and Chi Mei Optoelectronics Corp (奇美電子) both fell by nearly the 3.5 percent daily down-limit to NT$25.65 and NT$15.25 respectively, under-performing the benchmark TAIEX, which lost 2.72 percent.
IN THE AIR: While most companies said they were committed to North American operations, some added that production and costs would depend on the outcome of a US trade probe Leading local contract electronics makers Wistron Corp (緯創), Quanta Computer Inc (廣達), Inventec Corp (英業達) and Compal Electronics Inc (仁寶) are to maintain their North American expansion plans, despite Washington’s 20 percent tariff on Taiwanese goods. Wistron said it has long maintained a presence in the US, while distributing production across Taiwan, North America, Southeast Asia and Europe. The company is in talks with customers to align capacity with their site preferences, a company official told the Taipei Times by telephone on Friday. The company is still in talks with clients over who would bear the tariff costs, with the outcome pending further
WEAKER ACTIVITY: The sharpest deterioration was seen in the electronics and optical components sector, with the production index falling 13.2 points to 44.5 Taiwan’s manufacturing sector last month contracted for a second consecutive month, with the purchasing managers’ index (PMI) slipping to 48, reflecting ongoing caution over trade uncertainties, the Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) said yesterday. The decline reflects growing caution among companies amid uncertainty surrounding US tariffs, semiconductor duties and automotive import levies, and it is also likely linked to fading front-loading activity, CIER president Lien Hsien-ming (連賢明) said. “Some clients have started shifting orders to Southeast Asian countries where tariff regimes are already clear,” Lien told a news conference. Firms across the supply chain are also lowering stock levels to mitigate
NEGOTIATIONS: Semiconductors play an outsized role in Taiwan’s industrial and economic development and are a major driver of the Taiwan-US trade imbalance With US President Donald Trump threatening to impose tariffs on semiconductors, Taiwan is expected to face a significant challenge, as information and communications technology (ICT) products account for more than 70 percent of its exports to the US, Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) president Lien Hsien-ming (連賢明) said on Friday. Compared with other countries, semiconductors play a disproportionately large role in Taiwan’s industrial and economic development, Lien said. As the sixth-largest contributor to the US trade deficit, Taiwan recorded a US$73.9 billion trade surplus with the US last year — up from US$47.8 billion in 2023 — driven by strong
RESHAPING COMMERCE: Major industrialized economies accepted 15 percent duties on their products, while charges on items from Mexico, Canada and China are even bigger US President Donald Trump has unveiled a slew of new tariffs that boosted the average US rate on goods from across the world, forging ahead with his turbulent effort to reshape international commerce. The baseline rates for many trading partners remain unchanged at 10 percent from the duties Trump imposed in April, easing the worst fears of investors after the president had previously said they could double. Yet his move to raise tariffs on some Canadian goods to 35 percent threatens to inject fresh tensions into an already strained relationship, while nations such as Switzerland and New Zealand also saw increased
RSS