Innolux Corp, a flat-panel manufacturer, announced yesterday that it would reduce its factory utilization rate by more than 5% this quarter to maintain stable earnings. The decision comes amid concerns over ongoing inflation and uncertainties about interest rate cuts, which have weakened demand.
As a result, Innolux expects shipments of TV and PC panels to decrease slightly this quarter compared to the last. However, the company anticipates that its average selling prices will stay steady at around $259 per square meter, similar to the previous quarter. “We haven’t seen any signs of a strong demand increase in the latter half of this year,” said Innolux President James Yang. “Therefore, any adjustments to our plans will likely be minor.”
Yang noted that TV panel demand is expected to recover in the second quarter of next year when the industry’s seasonal demand cycle begins. Looking ahead, Innolux believes that the business outlook for next year is promising, driven by increased demand for PC replacements, the introduction of new notebook computers with AI features, and the launch of Microsoft’s new Windows operating system.
Last week, local media reported that Taiwan Semiconductor Manufacturing Co (TSMC) was negotiating with Innolux to acquire a 5.5-generation plant in Tainan. TSMC aims to build new chip packaging capacity using fan-out panel-level packaging (FOPLP) technology and double its advanced packaging capacity this year and next. The plant has been idle since late last year due to a lack of cost competitiveness in producing flat panels.
While Innolux did not comment on these reports, the company stated that it aims to form a “national team” with partners to develop FOPLP technology for AI PC chips. Selling the Tainan plant would align with Innolux’s strategy to enhance its chip packaging technology.
TSMC recently informed investors about its interest in FOPLP technology, but it mentioned that solutions for customers would not be available for another three years. Innolux returned to profitability last quarter, recording a net profit of NT$1.13 billion (US$34.62 million) after eight consecutive quarters of losses. This improvement was due to increased panel demand and price hikes for TV panels, spurred by major sports events like the Paris Olympics and UEFA Euro, which boosted TV demand.
The company had previously reported losses of NT$4.1 billion in the first quarter and NT$5.74 billion in the second quarter of last year. The gross margin improved to 10% last quarter, up from 4.2% in the first quarter and 0.6% in the second quarter of the previous year.
