Tuesday, July 3, 2007

Update on AU Optronics

I have 4 new articles I found regarding the LCD Panel industry and AUO specifically. They are all from DIGITIMES.

By date, the first one says that the strong demand for small to medium size panels will ease. This was actually from a report out of the Topology Research Institute. This says demand may ease by the third quarter as the major buyers have wrapped up their orders. Of course this is a concern if other articles are saying demand remains above supply and prices continue to increase, but I like to show both sides of the argument, when there is another side. No need to fool yourself into thinking something is a great investment when there are issues.

The quote dealing with AUO is:
Panel makers such as AU Optronics and Wintek that ship mainly to international brands will be less affected by the situation...
So if there is a slowdown in this segment it most likely won't hurt the main catalyst with AUO, that being a return to profitability.

Next article is from DIGITIMES and is titled "Major China TV makers may visit Taiwan panel makers, paper says."

Amid a tight supply of panels, presidents at major China-based TV makers...may visit Taiwan-based panel makers, hoping to sign contracts for securing panel supply, according to the Chinese language website sina.com.

"Sign Contracts" is always a good thing after prices have risen. It will lock in a nice margin for AUO. Game on.

"PC Panel prices to rise in July" is the title of the 3rd article. Basically we're looking for a $2-$5 rise in July, probably closer to $2-$3. Unless China comes to town with even more demand and contracts.

Last article is also from DIGITIMES and is titled "Shortages of small-to medium-size panels persist despite slower demand in June and July." It should be noted that all these articles have an aspect of AUO in them, they all deal with different products and sizes. The quote here on AUO is:

AU Optronics has a monthly capacity of more than 10 million units of small-to-medium panels, and currently it is running close to full capacity, industry sources said.

So although demand has slowed and prices are now "only" rising by $2-$3, shortages persist and China may be coming to town.