- Goldman Sachs comments on AU Optronics (NYSE:AU) noting that typically the TFT-LCD panel price trend does not go flat for a sustainable period. Prices tend to fall if they fail to go up. Panel makers have been attempting to raise 32" TV panel prices since 1H-Aug owing to continuing operating losses for TV panel sales at most panel makers. However, negotiations have remained tight with the result that prices stagnated at US$365 for the past 6 settlements.
As seasonal demand is now peaking out, negotiation power has started to shift to panel buyers, with the result that 1H-Nov. marked a decline of 1.4% for the mainstream 32" to US$360. 17" and 19" monitor panels stayed flat sequentially at US$130 and US$150 respectively. Firm sees the risk of a price cut as early as Dec. The 15.4" notebook panel price rose 1.9% to US$106 on still better notebook rather than desktop PC demand. They also see limited upside for notebook panel prices.
Goldman thinks panel makers are, and will still be in 2007, in a period of "growing pains" related to strong LCD TV demand growth. Another strong 50% yoy 2007 TV unit demand growth is likely to again be supported by around a 20% yoy TV price cut. This will lead to still below 10% operating margins and ROE even at tier one panel makers. Maintains Neutral on AUO.
Notablecalls: While there is nothing new to be found in this note, it reinforces my negative views on the LCD panel sector. This is also not good for GNSS; TRID etc.
As seasonal demand is now peaking out, negotiation power has started to shift to panel buyers, with the result that 1H-Nov. marked a decline of 1.4% for the mainstream 32" to US$360. 17" and 19" monitor panels stayed flat sequentially at US$130 and US$150 respectively. Firm sees the risk of a price cut as early as Dec. The 15.4" notebook panel price rose 1.9% to US$106 on still better notebook rather than desktop PC demand. They also see limited upside for notebook panel prices.
Goldman thinks panel makers are, and will still be in 2007, in a period of "growing pains" related to strong LCD TV demand growth. Another strong 50% yoy 2007 TV unit demand growth is likely to again be supported by around a 20% yoy TV price cut. This will lead to still below 10% operating margins and ROE even at tier one panel makers. Maintains Neutral on AUO.
Notablecalls: While there is nothing new to be found in this note, it reinforces my negative views on the LCD panel sector. This is also not good for GNSS; TRID etc.
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