TOKYO -- Sharp has mapped out a strategy for building a new, profitable future on its competitive, cutting-edge display technologies.
Sharp, which was acquired by Taiwan's Hon Hai Precision Industry on April 2, wants to engineer a turnaround by leveraging its indium gallium zinc oxide, or IGZO, display technology, which offers high picture quality while being cost competitive and energy efficient.
To pursue this strategy, the Japanese electronics maker plans to ramp up investment in plants and equipment to manufacture liquid crystal displays for laptops and other products.
IGZO, a major breakthrough in the making of backplanes, which control the pixels in display units, appears to be a vital part of the vision for the embattled manufacturer that Terry Gou, chairman of Hon Hai, better known as Foxconn Technology Group, has in mind.
In a joint press conference with Sharp President Kozo Takahashi held after signing the takeover deal, Gou stressed the technical advantages of the Sharp's display technology. Gou said Sharp's IGZO technology is the best in the world and a force to be reckoned with as he spoke animatedly about his business plans for the company.
The industry is currently focused on organic light-emitting diode, or OLED, display technology, which, rumor has it, will be adopted for future models of Apple's iPhone. Unlike a normal LCD, which uses a backlight that shines through a liquid crystal matrix, OLEDs are made up of pixels that glow on their own when a charge is applied. The technology provides excellent contrast.
In the April 2 press conference, however, Gou placed strategic emphasis on LCD technology.
Mapping out the way
Sharp will spend 60 billion yen ($539 million) out of the 388 billion yen it will get by selling shares to Foxconn to bolster and upgrade its display production lines, including those in its flagship Kameyama plants in Mie Prefecture in western Japan.
The investment will expand manufacturing capacity for midsize displays, mainly 7 through 18 inch ones for laptops and tablets.
But demand for displays used in personal computers and tablets is shrinking as smartphones are increasingly replacing them.
Sales of these midsize panels are projected to fall by 10% in 2016 from the previous year to some 400 million units, according to IHS, a U.S. market research company. Sales will sink further to 386 million in 2020, IHS predicts.
In contrast, the share of displays using IGZO and other oxide semiconductors is projected to rise to 20% in 2020 from 3% in 2015, thanks to their high energy efficiency and other benefits.
Ordinary 15.6-inch amorphous silicon-based LCDs for laptops are now priced around $25 per unit, down more than 30% in one year due to weak demand.
But displays using IGZO backplanes can fetch prices 30% higher than those of ordinary LCDs because of its better performance. Sharp is betting this high-value technology will help secure a stable revenue source.
Sharp was early to develop IGZO-based displays and has maintained a high share in the market. But Samsung Electronics and other South Korean competitors are now also offering high-quality displays using oxide semiconductors that could threaten Sharp's lead.
These South Korean makers are steadily boosting their competitive positions. Rumors are circulating that Apple has adopted a South Korean maker's panels for its next-generation laptops.
The South Korean manufacturers are quickly catching up with Sharp in this area, said Yasuo Nakane, a senior analyst at Mizuho Securities. "It is vital for Sharp to secure its share while it still has technological leadership in the field," Nakane said.
Sharp's move to expand investment in state-of-the-art LCD technologies is likely to intensify competition over high-end products. Some observers note that the acquisition by Foxconn will help Sharp sell its products to the Taiwanese contract manufacturer's customers. In the market for panels used in laptops, Taiwanese makers will find themselves in trouble because they lack technological competitiveness, said Yoshio Tamura, an IHS director.
Sharp's turnaround efforts under Gou's leadership could trigger a major shakeout in the market.