South Korean flat screen maker LG Display and two Taiwanese rivals are expected to report another quarter in the red, but losses in January-March likely narrowed from the previous quarter, driven by booming sales in China.

The liquid crystal display (LCD) industry has been battered by weak panel prices and depressed demand for electronics, but hopes are growing for a turnaround in the second half.

Despite the global recession, steep price drops in the past year have boosted demand for LCD TVs, especially smaller models, helping the industry cope with a severe downturn that forced makers to aggressively slash output in the past few quarters.

Capacity utilisation rates are recovering and panel prices are bottoming out, said Jae H. Lee, an analyst at Daiwa.

LG Display might be able to post operating profits on a monthly basis in May or June. Taiwanese makers will be slower in turning around.

Demand for flat-screen TVs remains strong in North America, and China's policy to subsidise TV and appliance purchases in rural areas has led to shortages in some TV panel categories, analysts said.

The display market has recovered somewhat and that was partly due to rush orders from China, said Robyn Hsu, a fund manager at Taiwan's Capital Investment Trust.

LG Display, the world's second-biggest LCD maker, is set to post a 330 billion won ($248 million) net loss in the quarter to March 31, according to Reuters Estimates.

The loss is a stark contrast to a 717 billion won profit a year ago but represents an improvement from a record 684 billion won loss in October-December, when LG was also hit by a U.S. price-fixing fine.

Consolidated first-quarter sales are expected at 3.56 trillion won, down from 4.04 trillion won a year ago.

Analysts estimate LG's average panel price in dollar terms fell around 10 percent in the first quarter, after diving 23 percent in the fourth quarter last year.

LG trails domestic rival Samsung Electronics (005930.KS: Quote, Profile, Research, Stock Buzz) but ranks ahead of Taiwan's AU Optronics (2409.TW: Quote, Profile, Research, Stock Buzz) (AUO.N: Quote, Profile, Research, Stock Buzz) and Chi Mei Optoelectronics (3009.TW: Quote, Profile, Research, Stock Buzz).

AU, which reports results on April 23, is forecast to post a first-quarter net loss of T$21.7 billion ($642 million), against a T$27 billion profit a year earlier and a T$26.6 billion loss in the fourth quarter.

Chi Mei is expected to report a net loss of T$20.7 billion, its third straight quarterly loss. Year-ago profit was T$15.2 billion and its fourth-quarter loss was T$31.1 billion.

TV LEADING RECOVERY

Analysts expect TV sales to remain robust for the next few quarters, helping LCD makers normalise production and make up for lingering weakness in sales of PC screens.

The main force in the LCD industry has changed to TV from PC, said Soh Hyun-cheol, an analyst at Goodmorning Shinhan Securities. And the LCD TV is one of a few products outperforming in the downturn, along with video games.

However, a sharp recovery in panel prices is unlikely as makers still have excess capacity and inventory levels are recovering.

LCD shares have had a strong first quarter thanks to hopes of a recovery, with LG Display jumping 34 percent, AU up 14 percent and Chi Mei climbing 26 percent. South Korea's KOSPI .KS11 and Taiwan's TAIEX .TWII both gained 14 percent.

Research firm Displaysearch forecast the average utilisation rate among LCD makers would rebound to 80 percent in the second quarter and rise further to about 90 percent in the second half, from 64 percent in the first quarter. ($1=1328.0 Won) ($1=33.78 Taiwan Dollar) (Additional reporting by Baker Li in TAIPEI; Editing by Jonathan Hopfner and Anshuman Daga)

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