LCD panel maker AU Optronics Corp (AUO, 友達光電) yesterday posted a first-quarter loss, but expects profitability to improve significantly in upcoming quarters as demand recovers.
Losses narrowed to NT$5.58 billion (US$172.87 million) in the quarter ended March 31, compared with losses of NT$8.24 billion the previous quarter, company data showed.
However, the improvement fell short of market expectations, with HSBC predicting losses of NT$1.5 billion and CIMB forecasting losses of NT$4.9 billion.
“With more offerings of our high-value-added TV and notebook panels, we hope to see profitability improve significantly in the second and third quarters,” AUO president Michael Tsai (蔡國新) told an investors’ teleconference.
AUO chairman and chief executive officer Paul Peng (彭双浪) said visibility had improved, with the company sensing an entirely different market sentiment from last month, adding that the momentum would extend into the second quarter.
“The first quarter is the bottom... We see a mitigation of pricing pressure and prices for certain panels could even start rebounding,” Peng said.
Customer restocking demand ahead of the Labor Day shopping season next month and TV replacement demand ahead of the Olympics in Rio de Janeiro in August are driving forces, he said.
“Supply and demand will move toward parity in the second quarter,” Peng said, adding that AUO expects shipments of TV and PC panels to grow by a mid-single-digit percentage this quarter from last quarter.
Average selling price would climb by a mid-single-digit percentage after falling 9.35 percent sequentially last quarter to US$349 per square meter, while factory utilization is tipped to rise this quarter from last quarter’s 90 percent, the Hsinchu-based company said.
Despite the expected short-term recovery, investors are concerned about a rapid change in the landscape of the global LCD industry following Hon Hai Precision Industry Co’s (鴻海精密) acquisition of Japan’s Sharp Corp.
“To cope with the change in the competitive environment, AUO has to speed up its strategy of focusing more on developing [value-added] products and commercial products,” Tsai said. “We also have to enhance the company’s operational efficiency.”
As South Korean rivals Samsung Electronics Co and LG Display Co are investing heavily in organic LED (OLED) technology with Apple Inc adopting OLED panels for its new iPhones, investors are watching AUO’s progress in developing next-generation OLED technology.
AUO supplies OLED panels for wearable devices and Internet of Things applications.
“We believe OLED panels are only one part of the mobile phone display landscape. We believe there is still ample room for LCD panels,” Tsai said. “To cater to growing demand for high-resolution and low-power-consumption panels, AUO is accelerating capacity expansion of LTPS [Low-temperature polycrystalline silicon] panels in China.”
LTPS features high resolution and low power consumption.
AUO has budgeted between NT$45 billion and NT$50 billion for capital expenditure this year, including investing in an LTPS plant in China. The new plant is to ramp up production in the second half.
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