Rebecca Kuo, Tainan; Joy Wan

 

LCD panels makers, especially for those who focus on large-size panels, are likely to brace for lackluster performance in the third quarter due to declining panel prices caused by slow sales of LCD TVs in the US and Europe as well as high inventory levels at TV vendors in China.

Although large-size panel makers AU Optronics (AUO) and Chimei Innolux (CMI) reported slightly improved monthly sales in July, their prospect for the second half of 2011 could be dimmed by declining FOB prices of LCD TVs and low capacity utilization rates. AUO's consolidated revenues in July saw an on-month increase of 4.7%, and CMI enjoyed a slight on-month gain of 0.5%.

Chunghwa Picture Tubes (CPT) and Hannstar Display posted sliding monthly sales in large-size panels because they shifted focus to manufacturing small- to medium- size panels. CPT's July shipments of large-size panels decreased 20.9% on-month, while Hannstar's shipments reduced 11%.

A traditional peak season for panels, with China's National Day holidays in October, third-quarter 2011 nevertheless might still experience sluggish sales, industry sources forecast.

Bad economy in Europe and North America, and high inventories in China may weaken demand for new LCD TVs in the third quarter, they said.

The global economic recession is also affecting China and Taiwan. Shipments of LCD TVs to China are expected to reach 41-42 million units in 2011, lower than the 43-45 million units estimated at the beginning of the year. Taiwan manufacturers operating in China could suffer as a result. A possible depreciation of the South Korean Won might also cut competitive edge of Taiwan makers.

Average capacity utilization rate of South Korean panel plants is expected to climb to 80-85% in third-quarter 2011, buoyed by the South Korea makers' brand-name products.

However, Taiwan has fewer branded products in the market than Korean competitors. So a relatively lower capacity utilization rate of 75-80% is expected. OBM and OEM orders, as well as contracts from Japan, will be major contributors to Taiwan's capacity utilization.

Still, Taiwan panel plants' capacity utilization rate could be lower than 75% if orders during China's national holidays and the Christmas season turn out to be weaker than expected.

Besides, China's BOE Technology and China Star Optoelectronics Technology (CSOT) have completed their 8.5G panel plants and entered mass production. Panels made by the Chinese suppliers are expected to enter the market as early as September 2011, snatching orders from Taiwan and Korea makers. Sources said that although Chinese suppliers' competiveness has yet to grow, makers in Taiwan and South Korea would have to brace for a negative outlook for the second half of 2011.