AU Optronics Corp (AUO, 友達光電) yesterday said that net profit last quarter more than halved from a quarter earlier due to excessive channel inventory and it expects demand to dwindle further this quarter as consumer spending on TVs and other consumer electronics slows amid rising living costs.
Russia’s invasion of Ukraine has driven up prices for energy and key commodities, stoking concern about inflation risks and dampening consumer demand for TVs and information technology (IT) products, the Hsinchu-based panel maker said.
As a result, some customers have prioritized inventory digestion and slowed orders, causing average selling prices (ASP) of AUO products to drop at a quarterly pace of 6.28 percent last quarter, it said.
Net profit plummeted 51.5 percent to NT$5.16 billion (US$176.05 million) last quarter, compared with NT$10.66 billion a quarter earlier, the lowest in six quarters.
Net profit in the first quarter plummeted 56.38 percent from NT$11.83 billion a year earlier.
Gross margin decreased to 14.3 percent from 18.9 percent the previous quarter and 22 percent a year earlier.
AUO said that order visibility is not clear and time is needed for customers to reduce channel inventory to a healthy level given macroeconomic uncertainties, COVID-19 lockdowns in China and the war in Ukraine.
Against this backdrop, “AUO will adjust its equipment loading rate in accordance with market changes,” company chairman Paul Peng (彭双浪) told an online investors’ conference. “TVs and consumer IT products are to be affected more significantly.”
AUO’s factory utilization rate fell to below 90 percent last quarter, the company said.
Shipments this quarter are expected to dip by a low single-digit percentage from last quarter, while ASP would go down by a high single-digit percentage, it said.
Large lockdowns in China have reduced AUO’s production by between 30 percent and 40 percent at its plant in Kunshan, one of its major manufacturing sites for high-end notebook computer panels.
The company’s capacity expansion plan at the Kunshan plant was hampered by COVID-19 restrictions, with equipment and workers barred from entering the city, while the restrictions have also snarled transportation, driven up logistics costs and created a new squeeze on supply chains, Peng said.
“Don’t be surprised if I tell you we are short of carton boxes and packaging tape to ship our products,” Peng said. “Supply chain management becomes crucial.”
There is brisk demand for commercial notebook computers, niche products and tailor-made panels, including those used in vehicles, industrial devices and medical devices, which are less sensitive to industrial cycles.
Automotive panels accounted for 9 percent of the company’s total revenue of NT$81.53 billion last quarter. TV panels made up 17 percent. Panels used in monitors, notebook computers and mobile phones contributed 46 percent.
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