AUO Corp (友達) yesterday cut capital spending by 20 percent to NT$36 billion (US$1.2 billion) this year from NT$45 billion, and suspended the construction of a new 8.5-generation production line in central Taiwan to cope with a severe downcycle after the LCD panel maker last quarter posted its first loss in about two years.
The slump in the industry and the weakness of AUO’s financial results reflect macroeconomic headwinds, including China’s COVID-19 lockdowns, Russia’s invasion of Ukraine, energy supply constraints and soaring inflation, the company said.
Additionally, the global economy is faced with a potential recession following a series of interest rate hikes, it said.
Photo courtesy of AUO Corp
“The latest downcycle came abruptly and exerted a broader impact,” AUO chairman and CEO Paul Peng (彭双浪) said at a teleconference yesterday.
“International factors have weighed on demand and we have difficulties controlling those external factors,” he said.
Previous downturns were caused by panel oversupply, but this one is much different, as an unfavorable macroenvironment has crippled consumers’ purchasing power and depressed demand for TVs, PCs and smartphones, he said, adding that recovery to normal levels is expected over an extended period.
“Clients are cutting orders and slowing down pulling in delivery as they prioritize efforts to digest excessive inventory,” Peng said.
With adverse conditions expected to last for a while, the company is slowing its capacity expansion and strictly managing inventory, he said.
AUO expects shipments to shrink about 15 percent quarterly this quarter, while it aims to keep average selling prices stable by improving its product offerings, Peng said.
Prices tumbled 13.63 percent quarterly and 23.83 percent annually to US$374 per square meter last quarter, he added.
The company also plans to adjust factory utilization, which stood at 70 percent last quarter, to counter market volatility this quarter, he said.
AUO incurred net losses of NT$5.63 billion last quarter, the first loss since the second quarter of 2020. It reported net profit of NT$5.16 billion in the previous quarter and NT$19.54 billion a year earlier.
Shipments shrank 18.7 percent sequentially and 23.2 percent annually to 4.92 million square meters last quarter, while gross margin fell to 2.7 percent, from 14.3 percent in the preceding quarter and 28.7 percent a year earlier.
Local rival Innolux Corp (群創) also drifted into the red with losses of NT$4.74 billion last quarter, the company reported yesterday.
It posted net profit of NT$1.89 billion in the first quarter and NT$21.42 billion a year earlier.
Gross margin plunged to 1.2 percent last quarter from 12.3 percent in the previous quarter and 33.1 percent a year earlier.
Innolux said shipments of TV and PC panels this quarter are expected to be flat from last quarter.
Average selling prices are expected to drop by a high single-digit percentage this quarter, while shipments of small and medium-sized panels are expected to plunge about 18 percent from last quarter, the company said.
CONSIDERATIONS: The NSTC instructed the park to assist laid-off workers and urge companies to use furlough programs to ease the effects of falling demand Firms in the Hsinchu Science Park (新竹科學園區), which houses major tech companies, reported laying off 496 employees last month amid weakened global demand, Hsinchu Science Park Bureau director-general Wayne Wang (王永壯) said yesterday. Wang told a news conference that 48 companies in the science park laid off employees last month, including one hard disk supplier which let go 241 employees as part of a plant closure due to falling demand. Other companies reported sporadic layoffs as they adjusted to weakening demand, he said. Wang made the remarks after local media reported the layoffs over the weekend. Although the global economy is struggling with high
DEJA VU: Echoing the probe into real-estate giant Evergrande Group, the bank is under Beijing police scrutiny after last week, telling investors it is ‘severely insolvent’ Chinese authorities said they recently opened criminal investigations into Zhongzhi Enterprise Group Co’s (中植企業) money management business, days after the embattled shadow banking giant revealed a shortfall of US$36.4 billion in its balance sheet. Police in Beijing said in a statement on WeChat that they took “criminal mandatory measures” against multiple suspects, identifying one by their last name, Xie (解). They urged investors to report cases or provide leads to the authorities, including filing complaints online. Xie Zhikun (解直錕), the group’s founder, died in 2021, but several of his relatives are executives at the company. The statement did not elaborate on what
German Chancellor Olaf Scholz and German Minister for Economic Affairs and Climate Action Robert Habeck have promised to solve investment subsidy issues for Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) and Intel Corp, despite the country’s budget woes. Uncertainty over the funding to TSMC and Intel has arisen after a ruling by the German Federal Constitutional Court, which cast doubt over subsidies for construction of local semiconductor chip plants. On Nov. 15, the court ruled that the German government’s decision last year to reallocate 60 billion euros (US$65.74 billion) of unused funding from COVID-19 pandemic support measures to its Climate and Transformation Fund
NEW TREAD: The Taiwanese shoe brand paired with TSMC to turn silicon waste into a circular economy good, following its success making shoes from coffee grounds Ccilu International Inc (馳綠國際), a Taiwan-based footwear brand, has become the first company in the world to turn silicon waste from contract chipmaker Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) into eco-friendly shoes. Last year, the global footwear industry saw the first pair of pressure-relief slippers made from recycled silicon waste by Ccilu. The brand continued to unveil follow-up collections, including sports shoes and massage slippers made from the same materials. In an interview with CNA, Ccilu CEO Wilson Hsu (許佳鳴) recalled the company’s innovation of the first pair of slippers made from silicon waste after its silicon waste treatment partner, Semisils Applied Materials
RSS