According to Reuters, AU Optronics (AUO) Executive VP Paul Peng said the company is experiencing demand that is more than it can handle. Peng expects LCD panel prices to continue increasing in the second half. Strong demand from China for LCD TV panels and solid recovery coming from North America is benefiting AUO as well as other LCD suppliers. At the Reuters Global Technology Summit that was held in Taiwan, Peng told attendees that AUO will be profitable in the second half.
I’ve a feeling that the demand strength is stronger now. TV is going up and China grows very fast. Orders are not a problem but supply will be a concern.
LCD panel shipments to branded TV customers in China is expected to reach 4 million units in 2009, quadrupling last year’s level. China’s stimulus package is profiting AUO and rival Chi Mei Optoelectronics (CMO). These two LCD suppliers may capture up to 50 percent share of Chaina’s LCD TV panel market this year. In the second quarter, AUO may have to run its LCD fabs at full capacity to meet demand.
The concern that I have is if LCD suppliers increasing production too quickly. In a market that is just rebooting LCD TV sell-through in North America, Western Europe and Asia might be slower than before. If that is the case, inventory at all levels of the LCD supply chain might build resulting in cancelled orders, reduced prices, utilization reduction, lost profits, etc. Of course, significant LCD TV set price reductions at the end will help accelerate sell-through at the retail level and clear out inventory.