AU Optronics (AUO) Q3 profit has dropped to the lowest in six quarters further reflecting the declining economic situation. AUO are not sure how long it will take for the industry to recover and are taking steps to ensure they can survive the current storm. According to the Taipei Times:
AU Optronics Corp (AUO, 友達光電), the world’s third-largest maker of flat panels, posted the weakest quarterly net profit in six quarters as corporations and consumers tightened spending on PCs and slim-screen TVs.
Net income plunged 96 percent to NT$860 million (US$25.83 million) in the July-September quarter, from NT$22.57 billion a year earlier. It was the lowest level since the second quarter of last year, during which the company made NT$5.92 billion, AUO said in a statement.
“We are not sure how long it will take for the industry to pick up from the U-shape trough. But, we are taking actions against this downturn,” vice chairman Chen Hsuen-bin (陳炫彬) told investors.
AUO plans to cut its capital spending for this year and next year by a combined 20 percent to less than NT$200 billion by pushing back the start of mass production of a new advanced line by one year to 2010, joining bigger rival LG Display Co Ltd’s step of slowing capacity expansion.
Cutting back on CAPEX and downsizing the workforce is probably all they can do right now. It is good to hear they have chosen the former option. Companies should also right now be looking to aggressively control their costs and improve their efficiencies accross the board. To gain advantages in any other area is going to be difficult.
The reduction in profits also reflects a reduction in the average selling price and the intensification of competition. According to the Taipei Times:
In the third quarter, the average selling price for liquid-crystal-display (LCD) panels dropped 21 percent from last year to an average US$137 per unit, which drove gross margins down from 23 percent a year ago to 8 percent, as the weakening global economy reduced consumer consumption.
AUO is one company big enough and smart enough to weather the current downturn. It all depends on how long the downturn lasts.
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