Innolux, a LCD panel manufacturer, has announced that it will be reducing its capacity plan for its G6 TFT LCD fabrication plant. The original plan was to have a monthly glass substrate input capacity of 90,000 by the end of 2009. Due to soft demand for LCD goods, Innolux will reduce the capacity target to 60,000. The G6 fab is located in Chunan, Taiwan. The fab was mostly capitalized via a recently secured syndicated bank loan for NT$30 billion (about US$937 million). The building for the G6 fab was completed in June. Equipment installation is expected to be completed by the end of 2008. G6 is generally used for manufacturing LCDs for smaller sized LCD TVs, large LCD monitors and large notebook PCs.
Innolux is a small player relative to giants such as LG Display (LPL), Samsung and AU Optronics (AUO). However, the decision by Innolux to reduce future capacity plans one year out indicates that the company expects economic woes to continue for a while. With current softness in demand for LCD goods indicated by significant price erosion of all LCD panels including those geared for LCD monitors, notebook PCs and LCD TVs, the future looks dim for LCD manufacturers. Even now LCD manufacturers are selling LCD panels at total cost or even below to prevent inventory buildup. I believe inventory buildup is inevitable unless production is decreased on an industry wide basis. My assumption is that most consumers who would have bought cheap LCD goods are holding onto their cash. They are not investing and they are surely not consuming. The recent declines in oil prices are merely allowing consumers to breath a little and is not an predictor of consumers going out and spending.
[tags]Innolux, LCD Manufacturer, Display Manufacturer, G6, Gen 6, 6G, G6 LCD Fab, 6G LCD Fab[/tags]