Flat-panel maker AUO Corp (友達) yesterday posted its worst quarterly losses in about 10 years and said it would suspend construction of a new advanced fab due to a dismal demand outlook as consumers turn conservative amid soaring inflation and greater macroeconomic downside risks.
The Hsinchu-based company said the latest industrial downcycle is the most severe in about 10 years, mainly due to plunging demand rather than overcapacity.
“Previous display market downcycles were mainly driven by the supply side, as panel makers’ aggressive capacity expansion caused an oversupply,” AUO chairman Paul Peng (彭双浪) told an online investors’ conference. “This time, it is driven by the demand side. End demand plummeted within a very short period because of the macroeconomic environment.”
Photo: CNA
It would take longer to see a recovery in view of soaring inflation, an energy crisis and Russia’s invasion of Ukraine, Peng said.
If the demand outlook does not improve in the short term, “we will not need to build new capacity at this stage to meet demand. So we are delaying the construction of a new fab in Taichung’s Houli District (后里),” Peng said.
No timetable has been set on when the fab construction would resume, Peng said.
The planned 8.5-generation Houli fab, which was estimated to cost about NT$150 billion (US$4.66 billion) to build, would produce high-end displays using next-generation micro-LED technology.
The board of directors in February approved an initial investment of NT$28 billion, it said.
For this quarter, AUO expects shipments to rise by up to 5 percent sequentially, as TV customers rush orders to rebuild inventory to meet year-end shopping demand.
Some TV customers and channels had reduced inventory substantially last quarter by offering deep discounts, while PC vendors are still struggling to digest excess inventory, AUO said.
The average selling price is expected to dip by about 5 percent sequentially in the final quarter, following a quarterly decline of 3.7 percent or annual drop of 29 percent to US$360 per square meter last quarter, AUO said.
As demand remains weak for most applications, AUO said it would continue “adjusting” its equipment-loading rate.
The panel maker said it lowered its factory utilization rate to 50 percent last quarter, as customers slashed orders to digest inventory.
In the third quarter, AUO saw its losses balloon to NT$10.43 billion, compared with losses of NT$5.63 billion in the second quarter. The company posted a net profit of NT$19.31 billion a year earlier.
AUO’s gross margin dropped to minus-14.6 percent last quarter from 2.7 percent in the second quarter and 27.7 percent in the third quarter last year.
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