Financial Material

In the nine months ended December 31, 2010, sales of LCD TVs were 651.3 billion yen, up 28.7% from the same period last year. On a unit basis, sales were 11.42 million sets, up 53.4%. In Japan, amid the demand increase triggered by the Eco-Point Program, Sharp sales, led by the AQUOS Quattron Series, were strong. In the three months from October to December, unit sales in Japan doubled compared to the same period last year, reflecting a rush in demand prior to changes in the Eco-Point Program. Overseas, China led the increase in both sales value and number of units. Japan’s Eco-Point Program will finish as of the end of March 2011, and a rush by consumers to purchase before this is expected in the fourth quarter. In preparation for this, Sharp will continue to keep close watch on sales situation and work to optimize its production and inventory level, while also boosting its medium-size TV lineup to meet the demands of Japan’s market for second and third TV purchases and demand in emerging markets. In North America, Sharp is looking to expand business by introducing super-size LCD TVs in the 60- and 70-inch range, for which demand is expected to increase, therefore creating new markets. For fiscal 2010 as a whole, we are projecting sales of LCD TVs of 850.0 billion yen, up 27.5%, and unit sales of 15.00 million sets, up 47.2%, compared to the previous year. Sales of LCDs in the nine months were 782.5 billion yen, up 32.4% over the same period last year. For large-size LCDs, the supply/demand balance in the first half of 2010 tightened reflecting a bullish sales projection by TV manufacturers. However, factors such as stagnation in the U.S. market, turbulence in European financial markets, and weak sales of local brand TVs in the Chinese market led to the worsened supply/demand balance, which resulted in a drop in panel prices. Sharp responded by cutting production by 10-20% at its large-size LCD plants in order to bring panel inventory levels back in line with the situation. Going forward, Sharp will strengthen efforts to cut costs by standardizing and sharing common designs and components across products, and by promoting procurement that takes full advantage of the appreciation of the yen. In addition, we will work to expand business and improve profitability by creating new markets for LCDs such as multi-screen display systems and TVs that are 60 inches and larger, where the advantages of the LCD panel plant in GREEN FRONT SAKAI, the only one in the world to utilize 10th generation glass substrates, can be clearly demonstrated. On January 24, 2011 (U.S. Time), Sharp filed a complaint with the U.S. International Trade Commission against Taiwanese company AU Optronics Corporation (AUO) and certain customers of AUO that manufacture LCD TVs and LCD monitors. Sharp also filed a lawsuit against AUO at the United States District Court for Delaware. Sharp will continue to step up efforts against infringements on its patents in order to better protect its intellectual property rights. For small- and medium-size LCDs, the severe market environment continued until the first quarter. However, the situation showed signs of a turnaround in the second quarter, centered mainly on in-vehicle applications, smartphones and tablet terminals. In particular, in the areas of high-definition LCDs and 3D LCDs where Sharp’s strengths can be utilized to the fullest, a rise in future demand is anticipated for high value-added LCDs used in applications such as game devices and smartphones. Sharp will work to improve profitability by building a production framework optimized to respond to the needs of the market, and by shifting our focus to growth fields where Sharp’s strengths offer a clear advantage. For fiscal 2010 as a whole, we are projecting sales of LCDs of 1,060.0 billion yen, up 20.7% from the previous year.

Sharp’s smartphones, introduced at the end of 2010, created a huge buzz in the market and rave reviews from consumers. However, due to factors like the Japanese market reaching maturity and a slump in conventional mobile phones, as well as the fact that sales of Sharp’s smartphones started late in the third quarter, sales of mobile phones in the nine months were down 7.4% to 322.5 billion yen, and down as well on a unit basis by 4.5% to 7.66 million sets. In Japan, major changes in the structure of the industry have taken place: besides a maturing market and the entry of foreign manufacturers into the fray, there have been vigorous moves by Japanese manufacturers toward business restructuring. Seizing upon these changes as an opportunity, Sharp will push ahead with the development and commercialization of smartphones and tablet terminals in Japan and overseas, by equipping them with Sharp’s one-of-a-kind technologies, including a superb user interface and 3D devices, while also adopting an open source OS. For fiscal 2010 as a whole, we are projecting sales of mobile phones of 430.0 billion yen, down 5.4%, and on a unit basis, sales of 10.00 million sets, down 5.2%, over the previous year.

Sales of solar cells in the nine months were 203.5 billion yen, up 41.3% over the same period last year and production volume was 927 MW, up 70.1%. Demand showed a steady increase supported by feed-in tariffs for solar-generated electricity as well as government subsidy programs for the installation of photovoltaic power generation systems in countries around the world. This had a strong positive effect on our sales. On the technical side, we succeeded in the development of a new crystalline solar cell with high conversion efficiency. To commence mass production of this solar cell within fiscal 2010, we started to introduce production lines with an annual production capacity of 200 MW at our solar cell plant in GREEN FRONT SAKAI. In our solar cell business, we are promoting innovation in our business model by implementing local production for local consumption and by expanding the value chain. Through these efforts, we will respond to a growing market and more intense competition on the global level that are expected in the future, as well as cope with exchange rate fluctuations. In November 2010, we acquired Recurrent Energy, LLC, a leading solar project developer in the U.S., as a wholly-owned subsidiary. Meanwhile, a joint venture formed by Sharp and Enel Green Power (EGP), completed construction of its first solar power generation plant in the south of Italy. Additionally, Sharp, EGP and STMicroelectronics plan to start operation of a thin-film solar cell plant in Italy in late 2011. Sharp is forming alliances with powerful partners in major markets in all regions around the world, while at the same time expanding the fields in which we do business, with the goal of being a total solutions company in the photovoltaic field. For fiscal 2010 as a whole, we are projecting sales of solar cells of 280.0 billion yen, up 34.1%, and on a production volume basis, 1,300 MW, up 64.2%, over the previous year.