LCD panel maker AU Optronics Corp (AUO, 友達光電) yesterday posted its first annual loss in six years as rapid capacity expansion by its Chinese peers deepened oversupply and led to a drastic slump in TV panel prices.
AUO posted a net loss of NT$19.19 billion (US$637.92 million) for last year, with its fourth-quarter loss widening to NT$8.83 billion from NT$3.99 billion in the third quarter, along with a NT$2.3 billion asset impairment charge from its solar business.
AUO posted net income of NT$10.16 billion in 2018.
“It was a challenging year for the display industry ... which faced strong headwinds as prices plummeted. Massive new capacity in China worsened the supply-demand situation amid relatively weak TV and mobile phone sales,” AUO chairman Paul Peng (彭双浪) told an investors’ conference. “Short-term improvement in recent months will not bring any major changes to the display industry’s oversupply in the mid to long term as long as China continues pouring new supply into the market.”
AUO expects the supply glut to persist in the medium to long term as Chinese firms continue producing large panels, offsetting supply reductions by Samsung Electronics Co and LG Display Co.
The Hsinchu-based firm expects this quarter’s shipments of TV and PC panels to fall by about 5 percent quarter-on-quarter, while a better product mix would help increase the average selling price by 5 percent.
Shipments of small panels for handsets and other devices are to fall by at about 15 percent quarter-on-quarter, the company said.
The equipment loading rate is to increase from last quarter’s 90 percent, thanks to improving demand on easing US-China trade tensions and lower channel inventories, it said.
AUO said that it is stepping up efforts to boost the value of its flat panels and diversify into other industrial segments.
The company on Wednesday announced a tender offer to buy up to a 30 percent stake in industrial computer supplier Adlink Technology Inc (凌華科技) for NT$3.72 billion.
Jih Sun Securities Investment Consulting Co (日盛投顧) does not expect the acquisition to immediately help AUO.
The company is likely to post another annual loss this year as oversupply reoccurs, with China’s BOE Technology Group Co (京東方), HKC Optoelectronics Technology Co (惠科) and Sakai SIO International Guangzhou Co (超視?) increasing production, it said.
The 2019 novel coronavirus outbreak in China poses another threat to the industry’s supply chain — ranging from procurement of raw materials to manufacturing and product deliveries — if the situation continues to worsen, Peng said.
The impact of the outbreak is unclear as the company’s clients and suppliers remain on vacation and do not resume work until Monday next week, he said.
AUO operates facilities in China’s Suzhou, Kunshan and Xiamen, and the plants remained operational during the Lunar New Year holiday, he added.
Photonics Industry and Technology Development Association (光電協進會) analyst Jarivs Lin(林政賢) said that the outbreak would disrupt the supply chain and negatively impact production in Hubei and Guangdong provinces.
However, AUO and Innolux Corp (群創) could benefit from transferred orders, Lin said in a client note.
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