Flat-screen Makers in Focus Over Glass Supply Fear

Taiwan’s flat-screen makers always seem to have something to complain about. In 2008, the global economic crisis accelerated a drop in panel prices, which fell by half in less than a year.

Large manufacturers like AU Optronics, the world’s third-biggest flat-screen maker, and Chi Mei Optoelectronics were forced to slash investment plans and cut factory utilisation.

Things finally seemed to have turned the corner, with factories in recent weeks running at nearly full tilt and sales improving on a month-on-month basis.

The pick-up is partly thanks to some $4.4bn in orders from China as well as growing excitement for higher-value touch screen with the approaching launch of Microsoft’s new Windows 7 operating system.

But just as the outlook was beginning to look good again, Chi Mei officials have warned that panel makers are facing shortages of glass substrate, a key ingredient, that could worsen in the next few months.

Analysts claim the supply gap should only be temporary and may in fact help the industry by reining in any wild expansion before clear signs of a recovery among consumers emerge. They say there are also signs that panel makers may finally be able to pass on the rising cost of glass to customers.

In other words, the glass shortage could turn out to be a good problem.

Election focus minds

Impending elections are bound to concentrate politicians’ minds on the interests of their constituents. That explains the UK financial services sector’s understandable fear that its interests will be ignored or, worse, attacked for electoral advantage as Britain marches towards a parliamentary election that can now be no more than 12 months away.

Banks and bankers will not be mentioned in any party’s manifesto except as whipping boys. George Osborne, who, as things stand, would become a future Conservative government’s chancellor of the exchequer, gave a flavour of this on Tuesday when he sent a “shot across the bows” of the banks with a call for them to curb bonuses.

What was interesting about his speech, however, was that he also attacked the Labour government for not standing up for the City of London’s interests in Europe, where continental European politicians are using the UK’s perceived weakness to press home an assault on the Anglo-Saxon model of capitalism.

The City is right to be concerned that political turmoil is distracting the government from a coherent defence in Europe of more specific UK financial interests. Hedge funds and private equity groups, in particular, have legitimate fears about stricter regulation from the EU. Mr Osborne has shrewdly played on these fears. If the Labour government is not to let its political opponents at home and abroad capitalise on its weakness, then it will have to define more clearly the parts of Britain’s valuable financial services sector that it wishes to preserve and promote, and then defend them robustly.

Low-profile rescue

A quiet changing of the guard took place in Milan this week as Matteo Arpe, the former chief executive of Capitalia, was appointed chairman of Banca Profilo, the listed private bank his Sator investment group stepped in to rescue in February.

Sator’s timely intervention allowed the Bank of Italy to maintain its clean sheet during the financial crisis with no bank having gone belly-up in Italy to date. In more ‘sophisticated’ countries like the UK, bank failures have been all too frequent.

Indeed, the authorities in Italy, often criticised for their sclerotic decision- making and lack of communication, have on this occasion combined smoothly to ensure a solution that has protected clients and recapitalised the bank while also injecting a new and respected management team to boot.

Sator is apparently the first private equity player in Europe to be allowed by national authorities to rescue a regulated bank. While other funds have picked up distressed institutions, they did so after they had crashed. In Profilo’s case, Sator stepped in before its impending failure became public.

The handsome paper return that Sator has reaped since its emergence as Profilo’s saviour will further burnish Mr Arpe’s reputation for astuteness. The fact that taxpayers’ pockets remain unpicked and minority shareholders have benefited from an impressive rally in the shares also makes this a doubly rare event in the Italian context – a deal in which those who normally lose out have quietly emerged winners.

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