LCD panel maker Innolux Corp (群創) expects panel supply constraints to continue through the year, due to shortages in key components and water supply, the firm said yesterday.
Chips used in panels for driver ICs, touch sensors and power management equipment have been in short supply, as manufacturers prioritized investment in higher-end chips, the Miaoli-based company said.
“The visibility of key component supply is very low,” Innolux president James Yang (楊柱祥) told an investors’ conference in Taipei yesterday. “The lead time of IC chips supply are more than six months, from four months. We cannot even receive clear answers about delivery.”
Photo courtesy of Innolux Corp
Glass substrate supply also tightened after production difficulties at some of the world’s largest suppliers, Nippon Electric Glass Co and AGC Inc, in December last year and January, Yang said.
Panel capacity worldwide is above market demand, but the scarcity of key components tilted the dynamics in favor of panel suppliers, Yang said.
“This situation will last for the whole year,” he said.
Innolux said it has signed contracts to truck water to its plants to keep production lines unaffected by the government’s 20 percent water supply cuts.
The COVID-19 pandemic has elevated demand for notebook computers, Chromebooks and small TVs, as online education and work-from-home became new norms during lockdowns, he said.
Innolux is the world’s second-largest supplier of flat panels used in notebook computers.
“We are optimistic about market demand in the first half of this year and cautiously optimistic about the second half,” Yang said. “COVID-19 has changed people’s lifestyle. Vaccinations will not change that.”
Innolux’s gross margin would increase this quarter from 20.4 percent last quarter, benefiting from panel supply constraints and structural changes in the industry, Yang said.
The LCD industry is entering a new stable stage and would no longer undergo “drastic ups and downs,” Innolux chairman Jim Hung (洪進揚) said.
“The industry is no longer a cyclic sector that undergoes drastic ups and downs,” Hung said.
Innolux’s strategy is to increase the value of its panels and boost revenue contribution from non-panel products, he said.
The company expects non-panel products to contribute a double-digit percent to its overall revenue within three years. New product lines include X-ray sensors and satellite antennas.
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