Tokyo Report: Sharp to Make LCD Panels Overseas

Tokyo, Aug. 17 (Jiji Press)--Sharp Corp. <6753> plans to make a
major strategic shift by launching overseas production of glass substrates
used to produce liquid crystal display panels for flat-screen television
sets.

Sharp has achieved rapid growth in LCD panels and TVs, but until
now the company has produced glass substrates only in Japan, in order to
prevent South Korean and other overseas rivals from gaining access to the
firm's cutting-edge technology.
To enhance the efficiency of LCD panel production, manufacturers
need to expand the size of glass substrates.
Sharp has so far produced what the industry calls "sixth
generation" and "eighth generation" glass substrates at its mainstay plant
complex in Kameyama, Mie Prefecture, western Japan.
But rivals in South Korea, Taiwan and other countries are already
now capable of manufacturing such glass substrates, prompting Sharp to
reconsider its strategy of limiting their production to Japan, at a time
when the company's earnings have been hit by plunges in prices of LCD TVs
and the yen's appreciation.
Preparing to promote LCD TVs in China and other emerging economies,
Sharp believes that offering low-priced products is inevitable if it is to
win a respectable market share in such markets.
Sharp decided to launch local production of glass substrates,
especially sixth-generation "mother glass," to achieve steep cuts in LDC TV
prices by cutting transport, labor and other costs, according to officials
at the Osaka-based company.
In order to curb spending on plants, which are estimated to cost
more than 100 billion yen each, Sharp plans to produce glass substrates at
joint ventures with local companies in which it will hold stakes of 20 to 30
pct.
In return for its limited stakes, Sharp plans to recover its
investments by receiving fees from its partners for helping manage the local
plants. It also plans to receive dividends from the joint ventures and to
buy LCD panels from them for use in TVs it will sell in local markets under
its own brand.
Despite the strategic change, Sharp will limit its production of
"10th generation" glass substrates to Japan for the time being in a bid to
prevent an outflow of the latest technology. It will begin operating a new
plant making such substrates in Sakai, Osaka, in October.
Tenth-generation substrates are good for production of 40- to
60-inch LDC panels. Sharp President Mikio Katayama believes that "nobody
will produce" bigger ones "for the time being" because extra-large 80- to
100-inch LCD TVs are unlikely to find their way into many households anytime
soon.
Analysts say that sooner or later Sharp will have to review its
business model of improving LCD TV productivity by enlarging glass
substrates.
Apparently with this in mind, Sharp, under the new strategy, looks
intent to boost further its strong market position as quickly as possible by
raising its global share of panel production, they add.
Given the intensifying international competition, however, it is
unclear whether Sharp's new strategy will produce the intended results.