LCD Screen Industry May Be Next IT Recession Victim

Taiwanese LCD panel maker Chunghwa Picture Tubes on Friday said it asked the government to help it extend the repayment schedule on NT$15 billion (US$430 million) in loans, becoming the first such company to seek aid amid the global recession.

The company is one of Taiwan's smaller makers of LCD panels, which are used in screens for laptop PCs, mobile phones and desktop monitors. It's move to shore up finances is a sign of the times.

"This economic downturn is a once in a hundred years event," Chunghwa said in a statement to the Taiwan Stock Exchange, adding that the company "must use aggressive measures" to protect its business.

The company said it currently has NT$20 billion in cash and short term investments and is not asking for a government handout.

The Taiwan government has offered to work with banks on extending loan repayments for companies on the island that apply for such assistance.

Officials have even established a framework around which they will offer loans from a NT$200 billion fund meant for LCD makers and DRAM chip producers.

DRAM makers were first in Taiwan to line up for help, including loans as well as mediation for potential mergers.

The DRAM and LCD panel industries share a similarity in that they both require massive investments in factories and production lines to keep pace with demand and competitors, prompting them to often seek loans from banks or investors. The two industries also use some similar technologies to build their wares.

But the situation among LCD panel makers is not currently as dire as DRAM makers, said Andrew Teng, an assistant vice president at Taiwan International Securities.

The debt load among DRAM makers is heavier than LCD makers, and most DRAM makers started posting losses around the end of 2007 due to a chip glut. LCD makers started didn't start posting losses until the end of last year.

But Chunghwa's statement shows the economic stress is building.

South Korea's LG Display, one of the biggest LCD panel makers in the world, reported a net loss 684 billion Korean won (US$452.3 million) in the fourth quarter of last year, after posting a net profit of 295 billion won a quarter earlier. The company said it expected shipments to decrease in the first three months of this year.

AU Optronics, Taiwan's top LCD panel maker, blamed falling prices for the net loss NT$26.6 billion it reported in the final three months of last year. The company had posted a slim NT$860 million net profit in the third quarter.

To comment on this article and other PCWorld content, visit our Facebook page or our Twitter feed.
Shop Tech Products at Amazon