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| (1) | 2000 Demand Trends
 | Business results for the electronics industry in Japan, including both products and devices, are expected to show a growth of 12% from the previous year.
In particular, demand for consumer electronics products is expected to increase for the first time since 1996, the year that consumers rushed to buy products before an increase in the consumption tax. This is attributed to the increased demand for audio-video products made to coincide with the start of digital BS (broadcast satellite) broadcasting and the recovery in demand for home appliances thanks to newly incorporated features.
The information-communications field is expected to grow 11% on the strength of increased demand for PCs and mobile phones, while the device field is expected to grow 26% due to large increases in demand for LCDs and semiconductors. | |
| (2) | 2001 Demand Trends
| Product demand in 2001 in Japan will slow down compared to the previous year, though we can expect to see continuing robustness, with a 4% increase.
Demand increase for consumer electronics (audio-video and home appliances), will be 4.1%, slightly higher than the 3.8% expected for information-communications products, which have up to now been the engine of growth for the industry.
These expected increases are due largely to the expected increase of 14% in audio-video products-an increase of a magnitude not seen in recent years. The following factors are the reasons for this increase in demand for audio-video products.
| 1) | Large increase is expected in demand for digital products released to coincide with the popularization of digital BS broadcasting. |
| 2) | Large growth is forecast for new categories in audio-video products: a 14-fold increase in plasma display panels (PDPs), a 5-fold increase in large-screen LCD televisions, and a doubling in DVD players. |
| 3) | Next-generation digital CS (communications satellite) broadcasting is slated to start in late 2001, and will use satellites positioned at the same location, 110 degrees east, as broadcast satellites (BS). This means users will be able to use one receiver to watch both types of broadcasts, and this will lead to further increase in demand for digital televisions and tuners. |
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| In home appliances, there may be a last-minute rush to buy products before the start of the new Consumer Electronics Recycling Law, set to go into effect in April 2001. Demand is then expected to fall off for several months after that. However, for the year as a whole, demand is expected to remain stable.
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| While demand has slowed down in the information-communications field, we can still expect to see huge demand.
In particular, PCs and mobile phones are expected to sell 13.5 million and 53.4 million units, respectively, making them the number 1 and 2 items in terms of value of sales.
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| An increasing percentage of sales in the mobile phone market are expected to come from repeat buyers. Last year, Sharp introduced popular models with color LCDs and built-in cameras, meeting the increasing demand for viewing of color content on screen and offering users the fun of sending photo attachments with their mobile phone e-mail. The next-generation mobile phone service, W-CDMA, will start this May. This and other infrastructure developments, along with a new variety of functions, will spur a new wave of mobile phone demand.
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| Furthermore, conventional fixed-line phones and facsimiles are incorporating large LCDs. In response to services starting this year, such as NTT's L-Mode and Japan Telecom's J-Style, we will introduce phones that act as Internet terminals. We expect that this will spur people to trade in their old phones and facsimiles for models that allow them to easily send and receive e-mail at home.
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| In addition, government measures like the following will be factors in spurring demand. If we can effectively move to take advantage of the opportunities created by these factors, we can expect positive growth.
| 1) | The government has extended the reduction in the tax rate for housing loans, which was originally set to expire at the end of June 2001, until the end of December 2003. The size of the tax reduction and the period during which it can be claimed as a deduction have been reduced, however. This will have a positive effect on demand, particularly for home appliances. |
| 2) | Under the government's IT budget, the fiscal 2000 revised budget has set a plan for "IT Classes" to be held in local community centers and libraries. The budget of approximately 19 billion yen for the purchase of equipment for these classes etc. is expected to boost demand for PCs and software. |
| 3) | Furthermore, the Ministry of Home Affairs (presently the Ministry of Public Management, Home Affairs, Posts and Telecommunications) has appropriated 186 billion yen for the purchase of PCs and software for public elementary, junior high and high schools for fiscal 2001. Besides increasing demand for PCs and mobile equipment, this surge in computers at schools is expected to boost demand for computers in the home. | | |
| (3) | Rapidly Growing Field of Digital Products in Fiscal 2001 and Sharp Efforts
| 1) | Plasma Display Panels (PDP)
Demand is expected to increase 20-fold, making PDPs a 20 billion yen market. Sharp will enter the domestic market this summer and plans to follow with entry into worldwide markets after that. |
| 2) | Large-screen LCD Televisions
In January 2001, Sharp introduced newly-designed LCD televisions at a reduced retail price, giving consumers one square inch of screen space for 10,000 yen (e.g. 200,000 yen for a 20-inch screen). This series will be introduced internationally starting in May 2001. |
| 3) | Digital BS Television and Tuners
In September 2000, we introduced the TU-HD1 digital BS Hi-Vision tuner, which has been selling extremely well since. We will also introduce value-added products including LCD televisions with built-in BS tuners and products combining a BS tuner and hard disk recorder. |
| 4) | DVD
Sharp introduced the DV-L80TV, a portable DVD player with LCD screen, and holds the top market share for this product category. In addition to expanding this lineup, Sharp will introduce DVD recorders at a price conducive to the mass market. |
| 5) | Personal Information Tools
The MI-E1, introduced in December 2000, has proved a huge success by adding various entertainment-oriented functions to Sharp's line of Personal Information Tools. This year, Sharp will introduce models following this concept into the US market and offer Personal Information Tools capable of receiving and displaying moving images. |
| 6) | Digital Cameras
Last year, Sharp introduced the VN-EZ5 Internet ViewCam for recording and sending moving images over the Internet. This year, Sharp will expand the lineup through OEM agreements. |
| 7) | LCD Monitors
Worldwide demand this year is forecast at 5.72 million units, up almost 50% from the previous year. Thanks to the drop in prices for LCD panels, LCD monitors are now just double the price of CRTs and this price decrease is expected to lead to increased sales. Sharp plans to offer LCD monitors ranging from basic, affordable models to high-end, high-resolution models in markets around the world. |
| 8) | LCD Projectors
Sharp is expanding its worldwide lineup to include projectors using ultra-high-resolution continuous grain silicon LCD panels. Our goal is to have the top market share in 2002. |
| 9) | Mobile Phones
With the W-CDMA proposed by NTT DoCoMo now accepted as a global standard, Japanese mobile phone manufacturers will have an easier time expanding into worldwide markets. This year Sharp will introduce mobile phones for Japanese providers and next year introduce products into the European and North American markets. |
| 10) | Personal Computers
Sharp PCs with the Liquiy PC Navigation 2001 software, which has voice recognition and proprietary Associative Retrieval searching technology, have proved popular since their release. This year, Sharp will further advance the lineup of PCs bundled with this software. | |
| Domestic demand (Top line is value; bottom line is number of units) |
| (Units: 100 million yen; 1,000 units; %) |
| Product name | F2000 | F2001 |
| Estimate | Against previous year | Forecast | Against previous year |
| Plasma display panels (PDPs) | 94 | 130.9 | 1,280 | 14-fold |
| 10 | 142.9 | 200 | 20-fold |
| Large-screen LCD televisions | 236 | 257.7 | 1,186 | 502.5 |
| 220 | 338.5 | 1,400 | 636.4 |
| Digital BS televisions and tuners | 980 | | | 2,779 | 283.6 |
| 700 | | | 2,500 | 357.1 |
| DVD players and recorders (audio-video field) | 579 | 190.0 | 1,060 | 183.1 |
| 1,100 | 247.7 | 2,500 | 227.3 |
| Personal information tools | 367 | 141.2 | 520 | 141.7 |
| 1,000 | 155.0 | 1,650 | 165.0 |
| Digital stillcameras | 1,352 | 170.7 | 1,685 | 124.6 |
| 3,039 | 178.0 | 4,500 | 148.1 |
| LCD monitors | 958 | 110.7 | 1,025 | 107.0 |
| 1,050 | 126.5 | 1,525 | 145.2 |
| LCD projectors (front-, rear-projection) | 390 | 129.9 | 415 | 106.4 |
| 90 | 140.8 | 116 | 128.9 |
| Mobile communications | 15,273 | 129.5 | 16,015 | 104.9 |
| 51,600 | 122.8 | 53,400 | 103.5 |
| PCs | 21,171 | 107.3 | 21,878 | 103.3 |
| 11,983 | 120.5 | 13,468 | 112.4 | |
| Note: | | Products with demand above 20 billion yen in annual value are listed in order of the percentage increase against the previous year. |
| Worldwide demand (No. of units) | (Units: 1,000 units; %) |
| Product name | F2000 | F2001 |
| Estimate | Against previous year | Forecast | Against previous year |
| Large-screen LCD televisions | 301 | 226.3 | 1,600 | 531.6 |
| Plasma display panels (PDPs) | 172 | 170.3 | 520 | 302.3 |
| DVD players and recorders (audio-video field) | 16,028 | 229.4 | 33,300 | 207.8 |
| Personal information tools | 6,780 | 163.2 | 11,840 | 174.6 |
| LCD monitors | 4,050 | 143.1 | 5,725 | 141.4 |
| LCD projectors (front-projection) | 1,163 | 139.8 | 1,560 | 134.1 |
| Mobile communications | 416,330 | 141.4 | 516,400 | 124.0 |
| Handheld PCs | 565 | 120.2 | 691 | 122.3 |
| PCs | 132,370 | 117.6 | 153,752 | 116.2 | |
| Domestic demand forecast, divided by field | (Units: 100 million yen; %) |
| | F2000 estimate | 2001 forecast |
| Value (Against previous year) | Value (Against previous year) |
| | Consumer electronics | 44,658 (104.0) | 46,506 (104.1) |
| Information-communications | 53,257 (111.5) | 55,293 (103.8) |
| Product total | 97,915 (108.0) | 101,799 (104.0) |
| Devices | 36,226 (126.0) | 39,819 (109.9) |
| Total | 134,141 (112.3) | 141,618 (105.6) | |
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