OSAKA -- Sharp's decision to withdraw from white goods production in Japan reflects CEO Tai Jeng-wu's ambition to transform the company into a technology specialty house like Apple.
The announcement to move refrigerator production abroad comes on the back of a rapid earnings recovery at the Osaka-based electronics maker. Instead of resting on the success, however, Taiwanese parent Hon Hai Precision Industry, or Foxconn, seeks to further bolster earnings by pursuing a clear division of labor within the group.
Under the plan, Sharp will focus on technology development, service planning and mass production of value-added devices.
A Sharp refrigerator plant in Osaka Prefecture had long been an obstacle to the vision of Tai, who took the helm in August 2016. "Why are you still making fridges in Yao, where personnel costs are high?" he would ask, referring to the city where the factory is located.
The plant opened in 1959 as a washing machine production site and has served as a white goods business hub for nearly six decades. The facility looks somewhat out of place in a largely residential area.
The white goods business was profitable even when the company was teetering on the brink of collapse a few years ago due to overspending on a liquid crystal display plant in Sakai, Osaka. Unlike other Japanese manufacturers that have been forced to shift production out of the country over deteriorating earnings, Sharp is moving a profitable operation abroad.
Some at Sharp are skeptical of the cost savings that the relocation will bring. But Tai was adamant, believing that reshaping the business model is crucial as the company looks to future growth.
"Sharp is no longer an LCD company. It will become a brand," he declared at a shareholders meeting in late June.
In Tai's telling, that Toyota Motor, which makes more than 10 million vehicles a year, still trails internet services companies like Alibaba Group Holding and Tencent Holdings in market capitalization speaks volumes about the changing business landscape. Simply manufacturing consumer products is not enough to raise corporate value, he has concluded.
Tai sees Apple, Sharp's biggest client, as something of a role model. The U.S. technology giant generates massive profits by specializing in product design and development while outsourcing production to contractors like Foxconn.
Sharp is zeroing in on its 8K display technology as a potential cash cow. With quadruple the resolution of 4K screens, it could find applications in such fields as telemedicine and surveillance.
In the "internet of things," Sharp will work to incorporate artificial intelligence and voice command features in home electronics to create new services that generate user fees.
Value-added devices also hold promise. The Mie Prefecture television plant is focusing on offerings like energy-efficient, high-definition IGZO displays and free-form displays, which can be manufactured in shapes besides the usual rectangles. Likely applications include automobiles and tablet devices.
Sharp is trying to bolster its technological prowess while relying on Foxconn and other overseas sites to produce consumer goods. Sharp's withdrawal from white goods production at home marks the point of no return as it charts a future path with its Taiwanese parent.