Local flat-panel makers AUO Corp (友達) and Innolux Corp (群創) are expected to eke out modest profits in the second half of this year, benefiting from production cuts by Chinese peers to tame overcapacity and bolster panel prices, market researcher Omdia said yesterday.
Chinese flat-panel makers launched a new strategy of managing factory utilization at a profitable range of 75 percent to 80 percent, as decade-long capacity expansions have led to oversupply, it said.
China commands about 76 percent of the global LCD market, greatly surpassing Taiwan’s 19 percent and South Korea’s 4 percent, Omdia data showed.
Photo: Chen Mei-ying, Taipei Times
“Chinese flat-panel makers significantly adjusted their factory utilization when market demand started weakening last month and this month. Such utilization management is very likely to bring the market back to stabilization next month,” Omdia senior director David Hsieh (謝勤益) said at a seminar in Taipei.
The production reduction has yielded positive results and panel prices have stabilized this month, Hsieh said.
That would help supply and demand to reach parity next quarter, he said.
“Keeping factory utilization fluctuating at a narrow range would help safeguard flat-panel makers’ profitability,” Hsieh said.
The global LCD industry follows a human-made production cycle, rather than seasonal cycles or market forces, as it did before, he said, adding that factory utilization for most manufacturers is forecast to hover at about 80 percent this quarter and drop to about 75 percent next quarter.
AUO and Innolux would enjoy stable profits, benefiting from order flux from Chinese TV vendors, he said.
AUO and Innolux swung into profits of NT$5.24 billion and NT$201 million (US$171.5 million and US$6.58 million) in the first half of this year respectively, compared with losses of NT$3.76 billion and NT$2.97 billion in the same period last year.
Omdia trimmed its global flat-panel revenue growth forecast to 3 percent for this year, from the previous 6 percent, on concerns that US tariffs would inflate consumer prices and dent consumer spending, Hsieh said.
The impact was “indirect,” as most display products are exempted from Washington’s tariffs, he said.
Taiwanese panel makers are in the process of transformation by revamping existing factories and expanding into more profitable businesses, he said.
“They have realized 50 percent of their transformation,” Hsieh said. “They have installed all the resources necessary.”
AUO and Innolux are targeting to expand their presence in the car display markets and look at next-generation micro-LED technology through acquisition, Hsieh said.
Innolux last month acquired Japan’s Pioneer Corp to enhance its smart cockpit product lineups, while AUO acquired Germany’s Behr-Hella Thermocontrol GmbH in 2023, he said.
Omdia said it expects Taiwanese firms to continue streamlining manufacturing facilities by retiring less advanced fifth-generation fabs, or even sixth-generation fabs in the next two to three years.
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