[Q&A] Sharp President on Business Results, Future Strategies
Sharp President Mikio Katayama took the podium at the company's results meeting Feb 1, 2012, and answered questions about the results for the first to third quarters of fiscal 2011 and future strategies to improve the company's performance.
The major questions and answers exchanged at the meeting are as follows.
Q: When will the LCD TV business (which posted a loss in the third quarter of fiscal 2011) return to profitability?
Katayama: The LCD TV business had turned a profit until the end of the second quarter of fiscal 2011 but fell into the red in the third quarter. And it will suffer a deficit in the fourth quarter and the entire fiscal 2011.
The biggest factor for the loss is a rapid demand decrease in the Japanese market. So, for business recovery, it is important to return to profitability in the Japanese market. We will meet this goal at a pretty early date and turn a profit from the entire LCD TV business in fiscal 2012.
Q: Could you explain about the operation statuses of the production lines for LCD panels at the Kameyama and Sakai plants?
Katayama: We have lowered the operation rate (of the production line for large-size LCD TV panels) at the Kameyama Second Plant since December 2011. As we have already announced, We will produce middle- and small-size panels at the plant so that we can increase the operation rate of the line. By reducing the production of large-size LCD TV panels at the plant, we will be able to reduce the deficit of our LCD panel business.
At the Kameyama First Plant, we will start to ship CG silicon TFT panels for smartphones in volume by the summer of 2012.
As for the Sakai Plant, when its production line for large-size LCD TV panels is in full operation, it can provide panels for four to five million TVs. And about half of them are used for our products.
Considering that we are currently selling only about 10% of our panels to other companies, we have to lower the operation rate of the line. So, we will lower the rate by about 50% for a while. Taking advantage of the low operation rate, we might introduce our production technologies for IGZO panels (using oxide semiconductor TFTs) to the Sakai Plant (in addition to the Kameyama Plant).
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Q: It was announced today that planned volume production of IGZO panels at the Kameyama Second Plant was delayed by two months. What is the cause of the delay?
Katayama: It is not that there is a problem in the production of IGZO panels. The delay occurred in the process of embedding panels in final products. But we will start to ship IGZO panels in volume within February 2012.
Speaking of IGZO panels, we targeted them only at smartphones and tablet computers at first. But, probably, we can apply them to larger screens. Specifically, there is an increasing demand for our IGZO panels for use in notebook computers equipped with a high resolution display and monitors (for desktop computers, etc). In regard to middle- and small-size panels, we intend to expand the business as early as possible by taking advantage of IGZO panels.
Q: Korean makers will commercialize large-screen OLED TVs. How are you going to respond to such a movement?
Katayama: LCD TVs are suffering from severe price decline. And it is very important to add value to them and increase their prices. This is a difficult challenge. And we are still not sure whether OLED panels will be a solution for Sharp.
What we should do now is not to think about competition with Korean makers. All we can do now (for Sharp's LCD TV business) is to sell 60-inch and larger high-end products in the global market no matter how niche the market for them is.
No maker in the world can turn a profit with commoditized LCD TVs (like 32-inch products) anymore because of the extraordinary price drop. However, demand for flat-panel TVs will continue to exist. Now that demand for flat-panel TVs has leveled off, it is important to consider how to establish a new TV market and add value to it. We cannot stay in the stagnant market.
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Q: What kinds of measures will you take to return to profitability in the (money-losing) solar battery business?
Katayama: Most of the loss in the solar battery business comes from overseas markets. In the Japanese market, it is turning a small profit. Especially, the unit price of solar batteries dropped by 40% in Europe (which was the major market for solar batteries). When combined with the impact of currency exchange rates, the sales price of our solar batteries decreased by about 50%.
The demise of the European market due to the financial unrest had a profound impact on us. Without eliminating such deficits in overseas markets, it is impossible to return to profitability in the solar battery business.
The business model of producing solar batteries in Japan and exporting them to overseas countries is no longer profitable. We will thoroughly focus on local production for local consumption. We are now preparing for it and started to ship products from the production line for thin-film silicon solar cells in Italy in December 2011 (Sharp has already started to produce crystalline silicon solar cells outside Japan).
Furthermore, we will aggressively incorporate downstream businesses such as power generation. In Japan, we expect that demand will come back in or after July 2012 (when power companies will begin to buy all electricity generated by private companies in Japan). We want to restore profitability to the entire business in fiscal 2012.