Outline of Main Products and Devices
1) LCD TVs and LCDs
For fiscal 2010, sales of LCD TVs were 803.5 billion yen, up 20.5% over the previous year. Sales on a unit basis fell slightly short of initial projections of 15.00 million units because of the sharp sales drop in Japan in the last half of March 2011, which were severely affected by the earthquake disaster. Nevertheless, Sharp was able to achieve a significant increase in unit sales compared to last year’s results, reaching sales of 14.82 million sets, up 45.5%.
In Japan, amid the demand increase triggered by the Eco-Point Program, Sharp sales, led by the AQUOS Quattron Series, were strong. As a result, unit sales in Japan grew significantly by 60% over the previous year. Overseas sales also increased, mainly in China, achieving double-digit growth on both a monetary and unit basis.
In fiscal 2011, we expect that the Japanese market will face difficulties, particularly in the latter half of the year, which follows the termination of analog broadcasting, due to the impact of the expiration of the Eco-Point Program. However, overseas markets, centered mainly in China and in countries with emerging economies, are expected to continue steady growth. To cope with this situation, Sharp will strengthen its medium-size LCD TV lineup in countries with emerging economies, and in North America and China, will introduce large-size LCD TVs such as 60-inch models, therefore creating new markets. Through these efforts, we aim to expand our LCD TV business.
Sales of LCDs for fiscal 2010 were 1,026.9 billion yen, up 17.0% over the previous year.
For large-size LCDs, the supply/demand balance in the first half of 2010 remained tight, reflecting bullish sales projections by TV manufacturers and demand resulting from the Eco-Point Program in the Japanese market. However, factors such as stagnation in the European and U.S. markets and weak sales of local brand TVs in the Chinese market led to deterioration in the supply/demand balance, which resulted in a continuing decline in LCD panel prices and an increase in inventory levels.
Sharp responded by cutting production by 10% to 20% at its large-size LCD plants, beginning in the second quarter. However, sales of LCD TVs declined in the wake of the Great East Japan Earthquake that occurred on March 11, 2011, and inventory levels increased in association with this decline. In addition, priority was shifted to ensure a supply of parts and materials for the production of small- and medium-size LCD panels. As a result, since early April, Sharp has stopped the input of glass substrates at its large-size LCD plants. However, we aim to restart operations in early May by stabilizing the procurement of parts and materials and normalizing inventory levels.
From the second quarter, Sharp expects to be able to maintain high utilization rates at its large-size LCD plants, with the conversion of a portion of the production line at the Kameyama No. 2 Plant to produce small- and medium-size LCDs, and with the increased production ratio of large-size LCD panels for TVs such as 60-inch models. In addition, the G6 plant in China (Nanjing CEC-PANDA LCD Technology Co., Ltd) will start full-fledged operations and contribute to the performance of our LCD business starting from the middle of fiscal 2011. This will allow us to procure panels that take advantage of cost competitiveness in China and the appreciation of the yen. We will work to improve profitability of our large-size LCD business by standardizing and sharing common designs and components across LCD panels and modules, and by strengthening efforts to cut costs through the optimization of model production where the advantages of each LCD plant can be clearly demonstrated.
Sharp and Sony Corporation (“Sony”) today announced that they have entered into an amendment to their agreement (the “JV Agreement”) executed in July 2009 to establish Sharp Display Products Corporation (“SDP”), a joint venture, to produce and sell large-size LCD panels and modules. Under the original JV Agreement, Sony was to make additional capital injections to SDP, resulting in a maximum 34% ownership by Sony of SDP by the end of April 2011, subject to certain conditions set forth in the JV Agreement. Sharp and Sony have now agreed to amend the JV Agreement to suspend those contributions and plan to continue to discuss any future contributions by Sony to SDP until the end of March 2012. This agreement was reached as a result of a series of wide-ranging discussions held by the two companies regarding the future direction of the joint venture in the midst of a business environment surrounding large-size LCDs that is changing at a bewildering pace.
For small- and medium-size LCDs, extremely adverse market conditions continued until the first quarter of fiscal 2010. However, beginning in the second quarter, market conditions showed signs of a turnaround 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, the number of manufacturers capable of producing these devices is limited. In this environment, the supply/demand balance has tightened and Sharp’s plants are operating at full capacity.
In response to this situation, Sharp has begun the installation of facilities at the Kameyama No. 1 Plant to produce small- and medium-size LCDs for smartphones. In addition, we are trying to convert a portion of the production line at the Kameyama No. 2 Plant to produce small- and medium-size LCDs. We will also work to differentiate ourselves from competitors through uniquely-featured products that are thinner, lighter in weight, and more power efficient, such as high-performance small- and medium-size LCD panels that use an oxide semiconductor (IGZO), which was announced on April 21, 2011. Through these efforts, we will reinforce and expand our small- and medium-size LCD business.
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2) Mobile Phones
Sharp’s smartphones, introduced at the end of 2010, created a huge buzz in the market and garnered 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 fiscal 2010 were down 9.1% to 413.2 billion yen, and down as well on a unit basis by 7.6% to 9.74 million sets.
Major changes in the structure of the industry have taken place in Japan: besides a maturing market and the entry of foreign manufacturers into the fray, there have been vigorous moves by Japanese manufacturers toward business restructuring.
In Japan, Sharp’s goal is to maintain its top market share by introducing smartphones and cost-competitive conventional mobile phones. In both Japan and overseas, Sharp is also working to expand business by creating “global smartphones” capable of competing with models from foreign manufacturers.
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3) Solar Cells
Sales of solar cells for fiscal 2010 were 265.5 billion yen, up 27.2% over the previous year. On a production volume basis, sales were 1,242 MW, up 56.8% over the previous year.
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.
We successfully developed a new single crystalline solar cell with high conversion efficiency and began mass production at the solar cell plant at GREEN FRONT SAKAI in March 2011. We are currently working on its full-scale production. In addition, 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.
Going forward, we anticipate a growing momentum for the revamping of energy portfolios and policies around the world. This will further accelerate the diversification and decentralization of the energy supply in the future with an eye on renewable energy sources such as solar power.
To respond to such changes in the market, Sharp is strengthening its efforts as a total solutions company for solar energy, engaged in a wide range of value chains from the design and development to the construction and maintenance of solar power generation systems, while creating solar-applied products tailored to local needs.
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