Sharp Corporation (SHCAY)

• Article
• Discussion
• Edit
• History
• Bookmark

Bulls: Reasons To Buy Feeling Bullish? Be the first to explain why this would make a good investment Bears: Reasons To Sell Feeling Bearish? Be the first to explain why this would make a poor investment Send the authors a comment or suggestion Be the first to make a suggestion See All Suggestions

Top Contributors Amit Amin Related Articles Suntech Power Holdings (STP) SunPower (SPWR) Solarfun Power Holdings (SOLF) Kyocera (KYO) JA Solar Holdings, (JASO)

Sharp Corporation is a Japenese electronics maker. The company produces mobile phones, LCD panels, flash memory, and other devices. Sharp Corporation was founded in 1912 and is based in Osaka, Japan.

[edit] Business & Financials

Sharp's edge has been dull of late. Revenue growth isn't the problem - from March 31, 2006 to March 31, 2007 (FY 2006) sales rose 12%, and in FY 2007 sales rose 9.3%.^[1] Net income, on the other hand, hasn't moved since 2006, when it rose 15%.^[1] The situation has only gotten worse.

[edit] Consumer/Information Products

• Audio-Visual & Communication Equipment (38% of total sales): This segment increased sales by 15.7% from 2007 to 2008, making it Sharp's fastest growing.^[2] Demand for for Sharp's AQUOS brand has been high, especially for its large-screen, high-resolution LCD TV's, and high-definition video recorders. The company's high-end cell phones have also been faring well, as consumer preference for app loaded phones rises. To maintain its technological advantage, Sharp released LCD technology last year capable of tactile recognition.^[3]

• Home Appliances (8%): Sales growth in this segment has been slow but positive, 6.4% from 2006 to 2007, and 4.4% from 2007 to 2008.^[2] The segment's main offerings include the Plasmacluster Ion Technology, a filter that can be used with air conditioners, humidifiers, and washer-dryers, HEALSIO, a superheated steam over, and refrigerators.
• Information Equipment (16%): This is the only consumer/information segment without any growth from 2007 to 2008.^[2] Sharp provides carriers WILLCOM Inc. and EMOBILE Ltd. in Japan, and T-Mobile, in the USA with wireless PDA’s. Sharp rebrands PDA's purchased from original design manufacturer High Tech Computer Corporation, which are then resold and rebranded. The segment also produces high speed multifunctional digital printers.

[edit] Electronics Components

• Large Scale Integrated (LSI) Chips (5% of total sales): Sharp uses highly packed integrated circuits (LSIs) to develop camera and mobile phone modules, and drivers for LCDs. Sales grew 11.6% from 2007 to 2008, in line with growing demand for high-end phones and cameras and increased development of new applications for LCD technology.^[2] However, taking away internal sales to Sharp's LCD product group, this segment grew only 1.6% during that same time period.^[1]

• LCDs (21%): Sharp's second largest product segment, sales grew 8.7% from 2007 to 2008. ^[2] Growth has been buoyed by expansion of the large-sized LCD market for TVs and computers.
• Solar Cells (10%): Sharp has been concurrently developing technology for two types of solar cell - for crystalline solar cells, and thin-film solar cells. Although Sharp is the worlds largest producer of solar cells, and demand for renewable energy has been rising, sales growth has been near stagnant for the past 3 years.^[2] The reason: unknown.

[edit] Breakdown By Geographic Region

Sharp Corporation Geographic Distribution of Sales^[2]

• Japan: As one would expect, Sharp dominates its home country Japan. The company has the largest domestic share of the cell phone market, and is one of the largest players in the LCD and LSI markets.^[4] Although sales rose 6.2% from 2007 to 2008, operating income fell 11.5% because of changes in Japanese corporate tax law.^[5]
• The Americas: Driven by rising U.S. demand for LCD TVs, sales in the America's rose 8.3% from 2007 to 2008.^[6] To satiate demand, Sharp opened up a new LCD TV production facility in Mexico,^[7] causing operating income to fall 21.9%.^[6]
• Europe: Regional sales in Europe rose 11.9%, and operating income climbed 38.8% in 2007. ^[6]
• China: Sharp's fastest growing geographic market, operating income increased 11.2% from 2007 to 2008, on sales growth of 22.4%.^[6] Growth has been fueled by a growing population of Chinese capable and willing to buy high-end cell phones and TV with LCD technology. ^[5]
• Other: In Sharp's other markets, mostly in Asia, sales grew 12%, and operating income rose 74.1%.^[6] Reason: unknown.

[edit] Trends & Forces

[edit] Economic Turmoil Is Weakening Demand And Creating Foreign Exchange Losses

Sharp is a multinational company - it earned 59% of its revenues oversees in 2008.^[2] When consumer spending in its primary foreign markets falls, namely the US and Europe,one the first things to go is high-end LCD TVs and cell phones. In Europe, LCD sales rose just 6% from June 2007 to 2008, compared to growth of 300% in China.^[8] In North America, electronics sales started falling after June, and so Q1 sales growth was still high, at 30% over 2007.^[8] But that doesn't even matter, taking into account the weaker dollar and the weaker euro, Sharp had foreign exchange losses of $51,000,000 in just the 3 months from April to June.^[8] Things have only gotten worse since. On October 24th, the Yen reached a 13 year high against the dollar, and a 6 year high against the Euro.^[9]

*Last Day of Each Month

[edit] Competition

[edit] LCDs & Other Electrical Components

In Japan Sharp is # 1, with just under half of the market for LCD TVs in 2006.^[12] Its main competitors are Sony and Matsushita, with 23.8% and 12.2% market share respectively.^[12] Worldwide, Sharp's grip on the market has been loosening, with 10.1% market share on a revenue basis, falling to number 3.^[13] However, Sharp is highly diversified, producing LCD's for TVs, mobile phones, computers, and mobile PDAs.

Competitors with LCD TV revenue share for Q1 '08 include:

• AU Optronics Corp. (AUO)
• Fujitsu Limited (FJTSY)
• LG Display Co., Ltd. (LPL)
• Matsushita Electric Industrial Company (MC)
• Philips (10.1%) -
• Samsung (19.3%) -
• Sanyo
• Sony Electronics (19.5%) -
• Toshiba (TOSBF)
• Hitachi (HIT)

[edit] Wireless PDAs

Sharp is a baby in the global wireless handset industry, focusing mostly on the Japanese market, where it dominates.

Competitors include:

• Ericsson/Marconi
• Nokia/Siemens
• Alcatel-Lucent
• Nortel

[edit] Solar Energy

The most effective way to distinguish solar cells is by their conversion efficiency, though these distinctions are very small, leading to the increased commoditization of the industry. This is a measure of the electrical energy generated from the solar cell against the light energy input (a combination of light intensity and the area of the solar panel).

Sharp is the largest photovoltaic cell manufacturer in the world, with a market share of 24%. Other competitors, with 2005 market share^[14], include:

• SunPower (SPWR) (insignificant in 2005) - One of the fastest growing solar companies, with one of the most efficient cells around
• Suntech (4%) -
• JA Solar Holdings, (insignificant in 2005) - A Chinese PV company that only sells monocrystalline solar cells; it lets its customers take care of building the modules and systems.
• Solarfun Power Holdings (insignificant in 2005) - Another Chinese PV company that operates 90% in Europe and makes most of its money by selling modules, rather than individual cells.
• Evergreen Solar (insignificant in 2005) - A solar company that produces string ribbon PV cells and operates at all production levels from silicon wafer to power system.
• Kyocera (8%) - A Japanese electronics company that is also a major manufacturer of solar cells
• Q-Cells (9%) - A privately owned, German solar manufacturer
• First Solar (insignificant in 2005) - A thin cell solar panel manufacturer that uses cadmium telluride instead of silicon for its cells.
• BP (5%), Mitsubishi (6%), and Sanyo (7%) - Not primarily photovoltaic cell manufacturers, but heavy market competitors nonetheless.
• EMCORE (insignificant in 2005) - A Concentrated Photovoltaic System manufacturer that uses Gallium arsenide PV cells and got its start in the solar business making power cells for satellites.
• Energy Conversion Devices - This company uses amorphous thin-film silicon in its ultra-thin, albeit low-efficiency solar cells.

[edit] References

1. ↑ ^{1.0 1.1 1.2 1.3} Sharp World Investor Relations - Financial Highlights
2. ↑ ^{2.0 2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8 2.9} Sharp World Investor Relations - Segment And Regional Information
3. ↑ JCNetwork - Sharp Announces New System LCD with Embedded Optical Sensors; Provides Input Capabilities Including Touch Screen and Scanner Functions
4. ↑ Annual Report, 2008, Firscal 2007 Review By Product Group, Page 23
5. ↑ ^{5.0 5.1} Annual Report, 2008, Financial Review, Page 39
6. ↑ ^{6.0 6.1 6.2 6.3 6.4} Annual Report, 2008, Financial Review, Page 40
7. ↑ Forbes - Sharp to construct LCD TV production base in Mexico - report
8. ↑ ^{8.0 8.1 8.2} Sharp Investor Relations - Consolidated Financial Results for The First Quarter Ended June 30, 2008
9. ↑ Bloomberg Currencies - Yen Rises to 13-Year High Against Dollar as Carry Trades Cut
10. ↑ Exchange-Rates.org - Euro Exchange Rate Graph
11. ↑ Exchange-Rates.org - US Dollar Exchange Rate Graph
12. ↑ ^{12.0 12.1} Seeking Alpha - Sharp vs Sony: LCD TV Battle Heating Up in Japan
13. ↑ DisplaySearch - Q4'07 Worldwide LCD TV Shipments Surpass CRTs for First Time; TV Revenues Reach a Record High, Up 10% to $33B
14. ↑ CIBC Initiating Coverage, SOLF, January 29th, 2007
15. ↑ ^{15.0 15.1} [1]
16. ↑ Forbes - Sun King; SunPower's New Solar Panel Is 22% Efficient
17. ↑ SharpUSA Product Brochure
18. ↑ Kyocera - Solar Timeline
19. ↑ Solarfun Website
20. ↑ http://jasolar.com/Web/products-en.asp
21. ↑ TSL 20-F 2007 Pg. 7
22. ↑ ESLR 2007 Earnings Call Transcript, Page 1
23. ↑ EMCORE.com: Terrestrial Solar Cells and Receivers"
24. ↑ ENER F1Q08 Earnings Call Transcript, Page 5
25. ↑ DSTI 10-k 2007 Pg 1
26. ↑ Ascent First Quarter 2008 10-Q Pg 23