FDP Firms Suffer Decline in Capacity Utilization Rate

Taipei, Jan. 21, 2011 (CENS)—Taiwan's first-tier makers of FPD (flat panel display) have suffered a 10% decline in capacity utilization rate and required their workers to take annual leave, a rare phenomenon in the third quarter, traditionally a busy season, according to the Chinese-language Economic Daily News (EDN), sister publication of Taiwan Economic News (TEN), citing market insiders.

The downturn is affecting leading FPD manufacturers, such as AU Optronics and Chimei-Innolux Corp., as well as upstream components and parts suppliers.

Output of computer-use FPDs plunged 30%, due to the effect of booming sales of tablet PCs on notebook PCs. By comparison, output of TV-use FPDs dropped 10%.

Insiders attributed the decline to sluggish demand in the U.S. and Europe, which account for 70-80% of the global FPD market, although demand from the mainland Chinese market remains strong.

Capacity utilization rate tumbled to 85-80% in mid-June, down from 95-90% previously. Therefore, FPD firms notified their workers to take mandatory annual leave, a far cry from the requirement of overtime works a year earlier. The lower capacity utilization rate will boost the cost of depreciation and amortization, postponing the timing for their operation to turn around.

The downturn of FPD firms will drive down shipment of upstream components and parts, including backlight board, drive IC, optical film, and printed circuit board. Those suppliers will also be required to cut their prices, which will dampen their margin.

Share price of Chimei-Innolux plummeted by the daily limit of 7% to NT$23 yesterday and that of AU by 5% to NT$19, both the lowest in two and a half years.