Asahi Glass furnace repair may affect glass supply for 4Q 2006 and 1Q 2007

Generally speaking, furnace repairs can be classified as a hot repair or a cold repair, WitsView pointed out. During a hot repair, it is not necessary for the furnace to suspend operations. However, the manufacturing process becomes extremely slow, seriously affecting glass production. When a cold repair is conducted, the furnace is required to close down. Sometimes the fire resistant bricks must be torn down as well. If changes in the furnace design are performed, the plant must undergo testing for a period of time.

WitsView said the production halt at Asahi´s furnace will supposedly require two to three months of time, and is scheduled to go online again in January 2007. As the production base is mainly responsible for the manufacturing of 5G glass substrates, the supply of this particular size should be affected the most.

Currently, Asahi Glass has two plants in Taiwan that churn out 6G-and-below glass substrates. A third facility will become operational in the first quarter of 2007. In addition, a 7.5G polishing line located at the Tainan LCD TV industrial park (also referred to as the "Tree Valley Park") will begin mass production in the second quarter of 2007, according to WitsView.

With one of Asahi´s furnaces under repairs, panel makers are looking to other sources for a stable supply. Chunghwa Picture Tubes (CPT) and Chi Mei Optoelectronics (CMO) have respectively turned to Nippon Electric Glass (NEG) and NH Techno Glass (NHT), while AU Optronics (AUO) is relying on Corning, WitsView noted. As these glass makers make use of their inventory to handle the increased demand, there should be no immediate impact on the glass supply, it remarked.

During the first quarter of 2006, glass-substrate makers began to experience an increased inventory buildup. To make matters worse, due to a panel oversupply, panel makers deliberately lowered their production utilization rate in the second quarter, rendering a mere 2.3% sequential increase in the glass substrate demand. In light of the accumulated inventory problems, relevant glass makers were prompted to reassess their expansion projects.

With panel manufacturers unable to keep up with the strong seasonal demand in the third quarter, prices for 17-inch and 19-inch panels were at a steady rise. However, panel makers are stepping up their production. The utilization rate of panel makers should maintain at full capacity.

In terms of the 5G lines, AUO´s L5C, BOE Optoelectronics Technology (BOE OT), HannStar Display, Innolux Display and SVA-NEC Liquid Crystal Display (SVA-NEC) have all gone ahead with their plans for additional capacity increases. In addition, CMO´s new 5G fab, which came online in the third quarter, is also expected to reach a capacity of 90,000 units by the end of 2006. Thus, overall glass substrate demand in the fourth quarter should see a 19.6% jump, compared to the third quarter.

Amid Asahi Glass´s furnace maintenance, a decrease in glass substrate production will probably be seen, WitsView said. With the strong seasonal demand projected for the fourth quarter, it is expected that the overall supply may grow a bit tighter in the near term, the research firm added.