LCD panel maker AU Optronics Corp (AUO, 友達光電) yesterday reported that its losses narrowed to NT$2.68 billion (US$86.22 million) last quarter from a quarter earlier, as its improved product portfolio helped bolster panel prices.
However, protracted US-China trade tensions and unresolved inventory issues might negate the normal seasonal upturn, it said.
The company’s conservative outlook for the second half of the year reflects how economic uncertainty has this year weakened sales of electronics products across the board, from TVs to PCs and mobile phones to automobiles.
Sagging end-market demand has also deepened an industry slump caused by oversupply, especially of excess panels churned out by Chinese makers, the company said.
“The outlook across the end-product segments in the second half looks tepid. Demand visibility has not improved significantly,” AUO chairman Paul Peng (彭双浪) told an investors’ teleconference.
“Customers have prioritized digesting their inventories over placing new orders,” Peng said.
AOU’s supply-chain checks showed that TV panel inventories did not drop, but increased last quarter, surpassing normal levels, the company said.
AUO is cautious about whether the peak season in the second half of this year would be as strong as it used to be, as macroeconomic uncertainty could restrain a pickup in panel demand, Peng said.
Trade disputes could sabotage the global supply chain, raise manufacturing costs and eventually hurt end-product demand, he said.
AUO said it would manage to keep shipments of TV and PC panels unchanged this quarter by shifting its focus to models with higher specifications, compared with last quarter.
Meanwhile, panels used in nonconsumer electronics, such as vehicle displays, would help lift average selling prices slightly this quarter from last quarter, the company said.
As a result, revenue would stay flat this quarter from last quarter’s NT$70.07 billion, it added.
In the second quarter, the company lost NT$2.68 billion, an improvement from losses of NT$3.69 billion a quarter earlier, and a reversal from net profits of NT$1.25 billion a year earlier.
Average selling prices of panels used in TVs and PCs climbed 3.53 percent to US$323 per unit last quarter, from US$312 in the first quarter, but plunged 10.53 percent from US$361 per unit a year earlier.
TV panels contributed 36 percent to AUO’s revenue last quarter.
Overall, gross margin improved to 2.8 percent, the company said.
AUO said it would reduce equipment utilization this quarter if customer demand and panel prices fall drastically.
The utilization rate reached more than 90 percent last quarter, the company added.
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