Vertical Divider

Performance Doesn’t Match Innolux’s Optimism About 2019
July 15, 2019
​ 
Despite a lack of revenue growth and a recent history of losses, Innoluxremains positive about the rest of 2019.  Innolux has booked its small/medium (S/M) panel capacity through the end of this year, but since the beginning of 2017 S/M has averaged 9.9%/month and under 12% in May.  This is a good thing for Innolux, as on a general basis the profitability of small panel production is higher than that of large panel production on an m2 basis.  Innolux saw its revenues edge up 1.5% to a four-month high of NT$21.31 billion in June, although the figures were still down 13.9% on year. The company shipped 10.14 million large-size panels in June, down 1% sequentially; shipments of small- to medium-size applications came to 19.58 million units, down 3.4%.
 
Second-quarter revenues reached NT$63.17 billion, up 5.4% on quarter. During the quarter, large-size panel shipments increased 8.4% on quarter to 30.92 million units; shipments of small- to medium-size panels were up 1.7% to 59.85 million units. For the first half of 2019, revenues totaled NT$123 billion, decreasing 7.6% Y/Y.
 

Nonetheless, total sales have declined by 23.6% over the same period, and both gross margins and operating profit margins have also been declining, with the last two quarters showing operating losses.  Based on the first two months of 2Q, which saw sales rise 4.6% over the previous quarter, there is some room for optimism (if June holds to the same m/m gain), but the year has a long way to go before we would be as optimistic as the article seems.
 
Some of the company’s optimism might come from the fact that even with Huawei’s smartphone shipment cutbacks at Innolux, they were able to book out their small S/M panel capacity, and the company expects to see growth in its automotive segment, implying a possible fix to the declining profitability.  A new 29” free-form curved dashboard and CID display has been adopted by a major OEM, certainly a coup, however production for this display is not expected to begin until 2022 and Innolux needs to boost sales of large panels to offset the declining prices that have been seen over the last few years a bit sooner.  
​