The gist of it is: Taiwan’s AUO and Innolux, are reportedly planning to close a 5G and a 5.5G LCD fab by the end of 2023. Looking at bellwether TSMC’s recent sales report, it looks like more belt tightening is on the way.
TSMC has announced its net revenue for March 2023, on a consolidated basis. The revenue for March 2023 was approximately NT$145.41 billion (about $4.8 billion), a decrease of 10.9% from February 2023 and a decrease of 15.4% from March 2022. Revenue for January through March 2023 totaled NT$508.63 billion (approximately $16.78 billion), an increase of 3.6% compared to the same period in 2022.
As the chip industry confronts an uncertain future, TSMC’s precipitous decline in sales serves as a stark warning that the path to recovery could be more difficult than anticipated. The prospect of an L-shaped bottom, rather than the familiar V-shaped bounce-back, looms large. TSMC and the wider semiconductor market must traverse this challenging terrain, where the possibility of an extended downturn and a more distant rebound grows increasingly likely.
The pandemic’s extensive impact on electronics and computer spending has forced the semiconductor industry to grapple with the fallout. Consumers and businesses alike have accumulated PCs and other devices during the crisis, potentially postponing the need for replacements and extending the industry’s slump. As TSMC grapples with these difficulties, the ramifications ripple through the entire Taiwanese tech industry. In fact, the company’s supremacy in high-end chips, manufacturing the main processors for leading brands like Apple, Qualcomm, and Advanced Micro Devices, indicates that its performance is closely tied to the overall well-being of the tech sector.
Taiwan’s Display Manufacturers’ Contradictory Confusion
Taiwan’s leading panel manufacturers, AUO and Innolux, have been navigating the same fluctuating market environment as TSMC, with recent reports indicating that both companies plan to close a 5G and a 5.5G LCD fab by the end of 2023. This decision seems to contradict earlier statements made by AUO Chairman Paul Peng, who, in March 2023, suggested that the supply-demand imbalance of LCD panels was gradually stabilizing, and the outlook for the panel industry appeared positive.
In the same month, Innolux faced conflicting information about the state of its operations. While Chinese online media reports claimed that the company had shut down at least 50 module assembly lines at its Ningbo plant in China, laying off 20% of the factory’s workers, Innolux swiftly dismissed these allegations. This discrepancy raises questions about the accuracy of information surrounding the panel industry.
| 2022 Financials | Innolux | AUO |
| Net Income Growth | -148.65% | -134.41% |
| Sales or Revenue (USD) | $73.83 billion | $81.44 billion |
| Sales or Revenue Growth | -36.10% | -33.42% |
These contradictions, and recent financials, paint a complex picture of the panel manufacturing landscape in Taiwan, specifically, and the industry, in general. On the one hand, there is a sense of optimism, as suggested by AUO’s assertion that the industry’s prospects are on the rise, and reports of rising LCD panel prices. However, a decision by both AUO and Innolux to close their respective LCD fabs suggests that they might be facing more significant challenges than previously revealed.
The panel industry is navigating an uncertain market, and conflicting reports only contribute to the overall confusion. The situation raises questions about the actual state of affairs in the panel manufacturing sector and whether the companies involved are genuinely optimistic about their future or merely attempting to project a positive image amidst a turbulent market environment. The Taiwanese stock market will reward companies that are able to make cutbacks and maintain a solid financial footing. On the other hand, if the worse fears of South Korea’s panel industry are right, Taiwanese display vendors won’t be immune to Chinese consolidation and price fixing. There’s uncertainty piled on confusion piled on a lack of clear insights into what the future might bring. One thing is for certain, the companies that don’t have significant market share are in danger of being overwhelmed by large conglomerates adopting an aggressive stance to control supplies and force prices up.
