Financial Material

In fiscal 2008, LCD TV unit sales were 10.00 million, up 21% from the previous year. On a monetary basis, however, sales were 729.3 billion yen, down 10.4% due to foreign exchange fluctuations and price declines. Due to market declines resulting from slumping individual consumption and falling prices, we faced an extremely harsh environment for profitability, especially in the U.S. and European markets. We expect this situation to continue for the time being. However, with the launch of the LCD plant in Sakai slated for the second half of fiscal 2009, we plan to introduce into markets large-size LCD TVs that have better image quality and are thinner, lighter, and more cost competitive than previous models. We therefore expect the sales composition ratio for 40-inch-and-larger LCD TVs to grow in Japan and overseas. Considering the current market environment, we are conservatively forecasting fiscal 2009 LCD TV unit sales of 10.00 million, the same level as the previous year. However, after the launch of the plant in Sakai, we expect sales during the second half of the fiscal year to increase by 40% over the first half. In Japan, the government announced its additional economic measures, including a program to award “eco-points” for the purchase of environmentally-friendly consumer electronics, which we expect will increase the demand for LCD TVs and other products. Also, we expect the market to grow steadily in China and other emerging economies. We will focus our management resources on markets, including Japan and China, where we can take advantage of our competitive edge. We will carry out business effectively, aiming at continuing double-digit growth in unit sales in Japan and China. We forecast fiscal 2009 LCD TV sales of 660.0 billion yen, down 9.5% from the previous year. In fiscal 2008, sales of LCD panels were 1,054.5 billion yen, down 14.5% compared to the previous year due to sudden price drops caused by a worsening supply/demand balance that affected both large-size LCDs and small- and medium-size LCDs. Besides closing certain production lines at the Mie No. 1 Plant and the Tenri Plant, which produce small- and medium-size LCDs, we optimized lines in terms of the products and panel sizes. For large-size LCDs for TVs, we implemented restructuring measures that include concentrating production at the Kameyama No. 2 Plant. By improving efficiency through business restructuring, we will reduce running costs from fiscal 2009 onward, thus improving profitability. Starting from the autumn of 2008, manufacturers of large-size LCD panels have significantly reduced production, which led to progress in inventory adjustment, and a substantially improving supply/demand balance. In the second half of fiscal 2008, we kept the utilization rate for the Kameyama Plant down and significantly reduced inventory. Currently, production at the Kameyama No. 1 Plant is still stopped, putting the production capacity of the entire Kameyama Plant at 75% of its previous level. However, as we have been working on product development with major TV manufacturers in Japan and overseas from the early stage of design, the number of orders is increasing, and the Kameyama No. 2 Plant is currently operating at full capacity. In the future, we expect the number of orders to increase steadily, mainly from our strategic partners in Japan and Europe. Therefore, in order to achieve high cost competitiveness with large-size LCD panels, we will commence operations at the new LCD plant in Sakai in October 2009. Also, in order to strengthen responsiveness of sales to outside customers, we are shifting to development exclusive to each user, providing total support from conceptualization to development to sales. Through these efforts, we expect a smooth startup of the new LCD plant in Sakai to achieve stable growth for our LCD business. For small- and medium-size LCDs, we will strengthen sales by creating new demand with our one-of-a-kind LCDs focusing on our core technology of System LCDs. We will work to cultivate new markets with Optical Sensor LCDs equipped with input functions, and with new ultra-low-energy consuming, high-visibility Memory LCDs. For fiscal 2009, we forecast LCD sales of 945.0 billion yen, down 10.4% compared to the previous year.

Sales of mobile phones and wireless PDAs in fiscal 2008 were 437.3 billion yen, down 32.8% compared to the previous year. On a unit basis, sales were 9.92 million, down 35%. Starting from 2008, demand for mobile phones decreased significantly in the Japanese market, due to limited new demand and a longer replacement cycle. We expect this harsh environment to continue in fiscal 2009. We will expand our market share through the timely introduction into market of models with unique Sharp technology, such as a handset equipped with a solar panel, our proprietary device. In addition, we will expand our overseas business by introducing affordable models, including mid-range mobile phones, in China and other emerging countries and by developing smart phones for developed countries, including the U.S. and Europe. We predict fiscal 2009 mobile phone and wireless PDA sales of 490.0 billion yen, up 12.0% compared to the previous year. Unit sales will increase 24% to 12.30 million.

Solar cell sales in fiscal 2008 were 157.1 billion yen, up 4.1% compared to the previous year, however, production volume was 421MW, up 16% compared to the previous year’s total of 363MW. Due to the revision of the Feed-In Tariff in Europe and the financial crisis, significant changes were seen in demand for solar cells and currency exchange rates. Amidst this environment, our solar cell business has been affected negatively by declines in unit price and exchange rate fluctuations. Especially in Europe, which accounts for half of our solar cell sales, the selling price has declined almost 40% in total, with nearly 20% declines both in market price and in euro-yen rates in the latter part of the second half. However, there are some favorable factors pointing towards the recovery; exchange rates currently appear to be stabilizing, material costs are expected to decline, and measures are being introduced around the world to promote the installation of solar power generation systems. In Japan, there are indications that demand will be stimulated, including the start of a subsidy for residential solar power generation systems and the possible introduction of new Feed-In Tariff for solar power generation. Sharp intends to make use of these opportunities to increase sales. Also, the subsidy policies announced in nations worldwide will revitalize markets and generate increased demand over the mid-to-long term. In fiscal 2009, we will accelerate initiatives to locally procure materials and localize the front-end process in order to quickly create a business structure that minimizes the effects of foreign exchange fluctuations and is prepared to respond when the supply/demand balance improves. For crystalline solar cells, material costs are expected to decline as the supply/demand balance for silicon is improving. We are promoting cost reduction with this decline in material cost and enhanced production efficiency, thus aiming to restore profitability. For thin-film solar cells, we started up the new line at the Katsuragi Plant in fiscal 2008 and are improving production efficiency and strengthening cost competitiveness. Due to these efforts, we forecast solar cell sales of 190.0 billion yen, up 20.9% compared to the previous year, and production volume of 770MW, 1.8 times greater than the previous year.