Financial Material

For the three months ended June 30, 2011, sales of LCD TVs were 154.3 billion yen, down 1.1%, while on a unit basis, sales were 3.29 million sets, up 22.3%, both compared to the same period last year. In Japan, a surge in demand in anticipation of the cessation of analog TV broadcasting resulted in the 40% increase in sales on a unit basis, compared to the same period last year. However, there was also a shift in demand. Small- and medium-size models intended as second and third TV sets in the home proved to be the best selling models, and as a result, average selling prices continued to decline. Meanwhile, overseas, despite a market slowdown in Europe and China, unit sales grew significantly in the North American and emerging markets. In the U.S., sales of large-size models 60 inches and larger expanded. As a result, total overseas sales surpassed results for the same period last year in both monetary value and unit sales. For the second quarter and beyond, Sharp is working to strengthen its LCD TV business with models that enable new ways of watching TVs. These include models that can be carried from room to room and enable users to enjoy digital broadcasting and the Internet via Wi-Fi connection, and those which feature wireless connection with Sharp smartphones and other products. In addition, we will be working to create new markets for large-size TVs, including 60- and 70-inch models. Sales of LCDs were 188.0 billion yen, down 28.0% compared to the same period last year. As explained in the Management Strategy Information Meeting held on June 3, 2011, Sharp will continue its LCD business restructuring, focusing on two key initiatives: 1) strengthening its mobile LCD business for which the Kameyama Plant will serve as the production hub, and 2) expanding its large-size LCD business by emphasizing LCD panels for large-size TVs 60 inches and larger as well as for non-TV applications. In addition, we will be working to improve the profitability through an alliance, by standardizing and sharing common designs and components across LCD panels and modules, and also by working proactively to pursue lower costs through the joint purchase of materials. In addition, for mobile LCDs, we are moving aggressively to initiate mass production of LCDs that use an oxide semiconductor (IGZO) at an early date. These LCDs will deliver optimum performance in panels intended for the next generation of smartphones and tablet terminals, including ultra-low power consumption and even higher definition. In this way, we will work to boost our competitiveness as well as strengthen the foundation of our LCD business.

Sales of mobile phones were 92.5 billion yen, down 30.8%, and unit sales were 2.10 million units, down 37.1%, compared to the same period last year. Sales of Sharp’s new models for the Japanese market were launched mainly in the latter half of the first quarter. In Japan, even as the mobile phone market is maturing, it is also undergoing major structural changes. Sales of conventional mobile phones are in decline, while overseas manufacturers have entered the market aggressively. We are taking proactive steps to differentiate ourselves from the competition by developing uniquely-featured smartphones such as models with the ability to link with AQUOS LCD TVs, as well as handsets that enable users to easily capture and view 3D images. In addition, we will introduce new models of conventional mobile phones that satisfy user needs. Through these efforts, Sharp will strive to maintain its top market share in Japan.

Sales of solar cells were 51.3 billion yen, down 11.1% over the same period in the previous year. On a production volume basis, sales were 259 MW, up 0.5% over the same period last year. In the wake of nuclear plant problems associated with the Great East Japan Earthquake, a review of energy policies is being undertaken not only in Japan, but also in major countries around the world, and there is a growing interest in solar power generation. In Japan, where demand used to be centered on residential applications, Sharp plans to strengthen product development, marketing and support for industrial applications such as mega-solar power generation systems, in order to respond to changes in the market. Overseas, the severe market environment such as the strong yen and falling market prices due to intensifying competition is continuing. In response, Sharp will be optimizing procurement and production on the global level to achieve cost reductions, by promoting local production for local consumption. As a concrete example of our commitment, an opening ceremony was held on July 8, 2011 in Catania, Italy, for a state-of-the-art thin-film solar cell plant to be operated by three companies: Sharp, along with two partners, Enel Green Power and STMicroelectronics. Annual production will be 160 MW during the initial phase of operation, and plans call for production capacity to be increased in the future depending on demand. In this way, Sharp is not limiting itself merely to the production and sales of solar cells and modules, but is also actively developing downstream business areas—from design and development of solar power generation systems, to construction and maintenance. Sharp will work to expand business across the entire value chain, and will be working aggressively to improve profitability.