Panel Price Hikes to Keep Innolux, AUO Profitable Through Q3: WitsView

Prices for thin film transistor-liquid crystal display (TFT-LCD) panels defied off-season factors in June, rising US$0.5 to US$2 per unit; while TV panels, accounting for the highest revenue ratio of local suppliers, enjoyed the highest price increase, according to industry sources. In conjunction with continued strong demand, panel supply tension is expected to last into the third quarter.

The sources also added that global shipments of LCD TVs are expected to increase this year again, assuring profitable operations of both the top-two Taiwanese TFT-LCD panel suppliers, Innolux Display Corp. and AU Optronics Corp. (AUO), until at least the third quarter. As a result, the two companies' profitability in 2014 is expected to be better than last year's.

C.H. Liu, assistant V.P., WitsView Technology Corp., pointed out that panel prices continued to rise in June, including a US$1 to US$2 increase in prices for 23.6- to 48-inch TV panels, as well as US$0.5 to US$1 for monitor- and notebook PC-use panels.

Regarding demand, Liu noted that several positive factors are driving up global TV shipments in the rest of this year, including the recovering economy in the U.S. and Europe, the withdrawal of plasma TVs from the market, provision of subsidies by governments in Mexico and Brazil to smaller-size TVs, new smart TV models launched by Chinese vendor Xiaomi etc..

Witsview originally forecasted global shipments of LCD TVs to hit 209 million units in 2014, but the LCD market research firm said it would adjust upward the forecast volume soon.

In June, a traditional off month, Liu said, many customers still couldn't get needed panels, which he attributes to different factors, including the increasing specifications and sizes of panel products, demands for new-application panels, lackluster yield ratio at Chinese panel suppliers, and no capacity-expansion projects announced by Taiwanese, Korean and Japanese suppliers this year.

Though TV sales during the long holidays in China in early May were not as strong as originally expected, Liu said, vendors' inventory was at healthy levels.

Both Innolux and AUO were profitable in the first quarter; while in the second quarter they saw further improved profitability thanks mainly to the panel price hikes.