AUO & CMO Return to Profits in Q1’06

Analyst are expecting profits for Taiwan’s #1 and #2 LCD manufacturers for Q1’06, although at a slightly lower level than in Q4’05 due to falling prices, capacity expansions and lower demand for IT/CE products in a seasonally slow Q1.

The world’s #1 and #2 are both cautious about the display market outlook. LG.Philips LCD (LPL) warned that there would be weaker margins in Q2’06. Samsung was also cautious and noted that ASPs will drop 10-15% faster than expected. Most agree that Q3 will give some relief as demand picks up in preparation for Q4.

AUO is expected to report a net profit of NT$6.61 billion or US$204 million, much better than Q1’05 where the company posted a net loss of NT$2.13 billion. Q4’05 profits were much higher at NT$11.47. CMO will also post a net profit of NT$4.60 billion, much better than the NT$1.97 billion loss posted for Q4’05.

Almost everyone is bracing for a squeeze in Q2 due to sharply falling prices. As an example, 17″ TFT LCD module prices are expected to drop to $117 in Q2 from $140 in Q1. Q3 should see a slight rebound to $125 and then showing continued strength in demand leading up to $133 in Q4. Historically, only the strongest suppliers have been able to weather the downward crunches while the weaker suppliers bled. QDI, one of the weaker suppliers, will be acquired by AUO. Source: Reuters

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