Sharp faces crisis as mechanical pencil inventor turns 100

Sony, Panasonic

Gou has invested 66 billion yen of his own money into the display venture with Sharp.

Widening losses and weakening demand amid a strengthening yen is the story of Japan’s electronics companies. Sony last had a profit in the year ended March 2008, and Panasonic has been unprofitable in three of the past four years. Like Sharp, both companies changed their CEOs this year.

Investors are getting less optimistic: the $32 billion combined current market value of Sony, Panasonic and Sharp -- Japan’s three biggest TV makers -- is dwarfed by Samsung’s $163 billion and Apple’s $638 billion. Sharp’s value has fallen 92 percent from its December 1999 peak.

“The Japanese electronics industry is in a crisis as South Koreans and Chinese are catching up,” said Toshihiro Nagahama, chief economist at Dai-Ichi Life Insurance Research Institute in Tokyo. “Japan is good at making products with better performance, and that’s the easiest for newcomers to copy.”

Miyuki Nakayama, a spokeswoman for Sharp, declined to comment. The company fell 1.9 percent to 202 yen at the 3 p.m. close of trading in Tokyo.

LCD Factories

Sharp’s troubles began when the company relied on debt funding for its LCD factories in Kameyama and Sakai, which opened in 2004 and 2009, respectively. The investment for the two factories, totaling 1 trillion yen, weighed on Sharp as LCD prices started falling and a stronger yen ruined its competitiveness against Taiwanese and South Korean companies.

The average price of a 40-inch LCD panel used in TVs fell to $250 in the first quarter of 2012, less than a 10th of the $2,772 price in the fourth quarter of 2003, according to researcher DisplaySearch.

The factory in Sakai, near Osaka, is an example of Sharp’s poor investment decisions, said Jeff Loff, a senior analyst with Macquarie Capital Securities in Tokyo. The world’s only operational 10th-generation facility, suitable for 60-inch TV panels, has been underutilized and adding to a glut since operations began in 2009.

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