The First Step is Recognizing You Face a Glut
DigiTimes reports:
AU Optronics (AUO), Chi Mei Optoelectronics (CMO) and HannStar Display have recently reduced their respective capacities for PC-use panels in an attempt to accelerate inventory clearance, according to sources at the panel makers. Although PC demand should start picking up in from the third quarter, the panel makers prefer to focus on clearing out inventory instead of expanding capacity to meet peak demand, indicated the sources.
We have commented numerous times about what appeared to be a pending glut in LCD panels. This is the first serious action taken to clear out inventories before it gets any worse. Still, it won’t be a one-quarter issue. The news is positive for PC makers such as DELL (DELL) and Hewlett Packard (HPQ - Annual Report) and negative for glass maker Corning (GLW - Annual Report).
Still, the leading panel vendors have set goals to ship more units than the market is expected to bear, says another DigiTimes report:
Global shipments of 32-inch panels will reach 17 million units in 2006, according to DisplaySearch. However, the combined shipment goals among makers is 20 million panels.
Disclosure: Trent has put options on Corning with a $30 strike price.
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[…] Corning Inc. (GLW - Annual Report), the largest maker of glass for liquid crystal display televisions and computer monitors, warned third-quarter results would miss analysts’ forecasts as customers try to reduce excess inventories. All but the most astute observers were apparently surprised by this, as the shares declined 8 percent in after-hours trading, and are now off 24 percent from the April high. […]