Shares of AU Optronics Corp (AUO, 友達光電), the nation’s top liquid-crystal-display (LCD) panel maker, and local peers soared yesterday after US glass maker Corning Inc said shipments could fall as a result of suspension of production at one of its Japanese facilities.
Tightening supply of mother glass could limit panel makers’ capacity expansion and lead to a longer uptick in panel prices.
The company revised down its shipment forecast on Tuesday, saying shipments could decrease by between 5 percent and 10 percent this quarter from last quarter, after a strong earthquake disrupted glass production at a plant in Shizuoka, Japan, on Monday. The company expects shipments will be flat or rise slightly amid strong demand.
“This would provide a boon to existing panel makers as the glass shortage could continue to slow panel suppliers’ output increases in September and ease concerns that a glut could return in the fourth quarter after panel makers resume capacity expansion plans on fragile recovery,” said Annabella Hsu (徐美雯), a LCD panel analyst at International Data Corp (IDC).
Slower capacity increase could help drive panel prices up US$2 or US$3 per unit on average next month from this month, reversing a possible decline, Hsu said.
IDC said it expects AU Optronics and its local rival, Chi Mei Optoelectronics Corp (奇美電子), will swing back into profitability this quarter as prices have rebounded to cost level.
On July 23, AU Optronics said the glass shortage should taper off next month after supply constraints began in May. AU Optronics said the short supply of glass could cut its production by between 5 percent and 10 percent this quarter.
AU Optronics shares yesterday rose 5.61 percent to NT$34.85, out-performing the benchmark TAIEX index, which dropped 0.15 percent. Shares of Chi Mei rallied 2.54 percent to NT$18.15, while No. 3 panel maker Chunghwa Picture Tubes Ltd (中華映管) rose 0.74 perent to NT$4.07.
In related news, Hsu said panel makers could win orders from Sharp, which may be unable to source enough glass to produce TV panels as suspended operations at Corning primarily produced large-size glass for TV panels.
Citigroup analyst Andrew Lu (陸行之) said in a report released yesterday that the global LCD substrate glass shortage could extend into the final quarter, resulting in firm panel prices. Lu said he could raise his fourth-quarter forecast for panel makers later because of sustainable prices.
AU Optronics and Chi Mei are sourcing 40 percent of glass they use from Corning, Lu said. He retained his “buy” rating on AU Optronics.
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