AU Optronics Corp (AUO, 友達光電) yesterday posted the first quarterly loss in 10 quarters, primarily due to a massive asset impairment loss from its solar business and price declines driven by oversupply.
In the quarter ending Dec. 31 last year, the nation’s No. 2 LCD panel maker swung into a loss of NT$8.24 billion (US$244.2 million), compared with a net profit of NT$3.38 billion in the previous quarter. The company booked NT$6.7 billion in asset impairment loss from M. Setek Co, which makes solar wafers and modules in Japan.
The panelmaker drifted into an operating loss of NT$1.17 billion last quarter, from an operating income of NT$3.39 billion in the previous quarter. Average selling prices tumbled about 13 percent sequentially last quarter to US$385 per square meter.
For the entirety of last year, AUO made a net profit of NT$4.84 billion, down 74 percent from NT$18.07 billion in 2014.
AUO cited the staggering global economy, decelerating growth in emerging markets and volatility in developing nations’ currencies as reasons for sluggish demand for LCD panels.
This year, no significant improvement is on the horizon, AUO said.
“Overall, market demand is stabilizing. However, we do not see a robust growth momentum yet. We do not anticipate a significant improvement in the macroeconomic situation this year,” AUO chairman Paul Peng (彭双浪) told investors.
Peng also said that oversupply in the LCD market would be a “new norm,” as Chinese LCD manufacturers continue to ramp up production.
To minimize the adverse affects of overcapacity on its bottom line, AUO plans to boost revenue portion of its non-commodity panels to more than 40 percent this year from 30 percent last year, Peng said. Non-commodity panels include those used in commercial, medical, or automotive industries, he said.
As Apple Inc is expected to use OLED panels for new-generation iPhones, AUO ’s progress in developing OLED technology caught the attention of investors.
Peng said handset segment would not be the main focus, given heavy investments and low yield rate. AUO would only focus on making high-resolution displays used in premium products, such as smart watches and virtual reality devices, he said.
Short-term outlook also appears bleak, Peng said.
“The first quarter is a traditional low season. We expect weakness to extend into the current quarter,” he said.
“The bright spot is that the first quarter will be the trough this year and our operation will improve quarter by quarter,” Peng said.
AUO said it plans to cut equipment loading rate to cope with weak demand from the more than 80 percent last quarter.
Shipments of PC and TV panels are expected to shrink by low-teens and mid-teens sequentially this quarter, while price decline would be less steep, AUO forecast.
AUO plans to spend NT$45 billion on new equipment this year, up from last year’s NT$33.4 billion.
It is to finance a new 6G production line in China to make high-resolution LTPS panels and a capacity expansion in Taiwan.
The Chinese production line is to start in the second half this year.
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