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For Sharp, Good Technology Isn’t Enough

In its effort to stem a tide of red ink, Japan's {complink 4907|Sharp Electronics Corp.} is reportedly considering selling two TV assembly factories in China and Mexico. The Wall Street Journal estimates the move would eliminate 3,000 jobs in addition to the 5,000 layoffs Sharp has already announced.

This month, Sharp announced a loss of nearly $2 billion for the quarter that ended in June, and it said it expects to remain in the red the rest of the year. The loss resulted in Sharp's first job cuts since the 1950s.

Nowhere in the analyses of “What went wrong at Sharp?” has technology been mentioned. Sharp remains one of the world's premier TV developers. Its patented Aquos TVs, introduced in 2001, still command praise and a price premium, and Sharp is one of Apple Inc.'s three largest suppliers of LCDs.

Analysts say Sharp has been hurt by a double whammy: the strengthening of the yen and weakness in the TV market. LCD prices have come down so much that leading vendors are consolidating their manufacturing operations to save costs. Samsung spun off its LCD business into a wholly owned subsidiary. Toshiba, Hitachi, and Sony are participating in a government-financed joint venture called Japan Display. (See: ‘Big Three’ Emerge in LCD Market.)

Adding to its troubles, Sharp built a state-of-the-art LCD factory in Japan in 2009.

As a result of all this, Sharp has been unable to compete price-wise with other TV makers. To keep its business afloat, it made a decision that will likely come back to haunt it: In March, Foxconn Electronics' parent, Hon Hai, agreed to take a 10 percent stake in Sharp's LCD business. (See: Foxconn Shores Up Display Supplies.)

After Sharp announced its loss, Foxconn said it was re-evaluating that investment. Since the deal has not closed (pending review by Taiwan's stock market authorities), Foxconn wants to pay less than the $800 million it offered in March. I have to wonder whether Foxconn would have agreed to pay more if Sharp's stock had soared.

Sharp is reportedly mulling selling its China and Mexico factories to Foxconn.

12 comments on “For Sharp, Good Technology Isn’t Enough

  1. SP
    August 22, 2012

    Looks like many things went wrong in Sharp's business plans. But one thing is commendable that this is the first job cut since 1950. Electronics industry is the tough market. Unless you reinvent yourself according the market trend its difficult to sustain. Foxconn always remain in the news for wrong reasons. If Sharp sells to Foxconn, what would be Foxconn startegy to make Sharp sustain. What would happen to the employees.

  2. elctrnx_lyf
    August 22, 2012

    The fall of sharp is really makes many engineers feel bad. I feel sharp has never tried to grow more horizontally. With the falling prices for LCDs it is becoming very difficult for sharp to maintain the existing lines.

  3. SunitaT
    August 22, 2012

    Analysts say Sharp has been hurt by a double whammy: the strengthening of the yen and weakness in the TV market.

     Its totally unfortunate that strengthening of yen has impacted revenues of so many Japanese industries. I wonder why Japan government is silently watching the yen appreciation instead of intervention. China used currency manipulation to its advantage, Japan could have used the same tactic to protect technology giants.

  4. SunitaT
    August 22, 2012

    With the falling prices for LCDs it is becoming very difficult for sharp to maintain the existing lines.

    @elctrnx_lyf ,  still all is not lost for Sharp because it is one of Apple Inc.'s three largest suppliers of LCDs. So Apple's success will help Sharp  improve its revenue stream.

  5. SunitaT
    August 22, 2012

    Unless you reinvent yourself according the market trend its difficult to sustain.

    @SP, I think Sharp did pretty   good job of keeping pace with technology. Infact it started a state-of-the-art LCD factory in Japan in 2009. Its just that factors like appreciation of Yen has impacted the company and there is nothing that the company can do to counter this.

  6. FLYINGSCOT
    August 22, 2012

    It is a shame for Sharp as it has been such a good company over the years.  Imagine not having a layoff since 1950.

  7. Barbara Jorgensen
    August 22, 2012

    I still have a bunch of working Sharp products in my home–even some old CRT TVs. Although they are no longer in demand, these particular products still work. I can't say the same of some of the new devices I've bought. It seems to me that Sharp did keep up with the market in terms of moving to LCDs, but other than Aquos I'm not sure if they have differentiated themselves that much. They are in a number of other consumer markets–anybody have feedback on those devices?

  8. Jorge Anaya
    August 22, 2012

    Nothing will happen to Sharp employees, why do you immediately assume that IF Foxconn buys the plant, workers will lose their jobs, no one lost their job when Sony sold their Tijuana site to Foxconn.

  9. Wale Bakare
    August 22, 2012

    Do you think HDTV and Smart TV could be responsible for drop in LCD TV?

  10. Adeniji Kayode
    August 22, 2012

    @Wale,

    I believe its a major reason. The more a technology stays around the cheaper it become..

  11. SP
    August 27, 2012

    How about the LED TVs?

  12. Barbara Jorgensen
    August 27, 2012

    In general, LED TVs are still more expensive than LCD. But I just noticed last night that Sharp is making a big push in its really-big screen LED TVs, up to 70 inches. I think Best Buy is letting you test drive a Sharp TV and if you don't like it they will take it back. The prices sounded pretty good too–$1k-plus for 60 inches, I think. That should drivessales, although once you get one, it'll be awhile before you are int he replacement market. I think our Sharp TVs are the longest-lasting of any brand we own

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