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Cash-Poor Sharp Mortgages Display Factories
Sharp is one of the small handful of companies that actually make the LCDs that go into products badged with many other companies' names. Now, itwbennett writes "The company was asked by one of its main banks to put its physical assets, including its Apple screen plant, up as collateral for about $2 billion in emergency loans, according to an IDG News Service report. Sharp expects to lose over $3 billion this fiscal year."
Sharp makes amazing screens why are they in trouble? What did I miss?
Just because you make a fantistic bunch of hardware doesn't mean you can't have a load of bozos running around the board room with seltzer bottles in one hand and balloons in the other. Remember how bad Commodore was at marketing the Amiga? Ready ... FIRE! Aim ...
A feeling of having made the same mistake before: Deja Foobar
If the title of this post isn't reason enough to reform the English language, I don't know what is. At first I though it had something to do with homeowners refinancing.
Cash-Poor (adj) Sharp (adj/noun) Mortgages (verb/noun) Display (verb/adj/noun) Factories (noun)
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When I was checking out TVs, I quickly marked Sharp off my list. IMO their panels have the worse viewing angle washout of any of the panel types and no real compensating high point (Yellow pixels are more gimmick than benefit).
I see lots of talk from Sharp, but I have never seen a Sharp screen I want to buy, so no great loss IMO.
Or DEC. Or Silicon Graphics.
Actually, it's starting to look like quality of products is always inversely proportional to quality of directors/management. If that isn't somebody's first law of economics, I'm claiming it.
Burns: We're building a casino!
McAllister: Arrr. Give me 5 minutes.
What are "Sharp Mortgages", and what caused them to be cash-poor. Is this part of the toxic asset relief program. Apparently, they're displaying their factories. So mayb these were commercial loans for industry used to build factories...
Hmm....
Anglish!
The LCD screen market has been brutal for the past couple of years. Plants have high fixed capital costs. i.e. building plants are expensive. The market has surplus capacity. i.e. everybody thought people would be buying their screens. In this situation, if the plant is running you might as well run it at full throttle – it is almost as cheap to build 100 rather than 80. This leaves a company with 2 choices.
First, you can shut down the factory and leave all of the capital ideal. Even worse, with the technology cycle so fast, when you restart the plant it is going to be obsolete.
Second, you can engage in a long drawn out price war. Unfortunately Sharp is facing Samsung who has the same problem – overcapacity – but have deep better diversified pockets to survive the price war. The second option is better – you bleed slower.
If you want an analogy, take a look at the airlines. The price wars have been so brutal that, IIRC, the total return on equity invested in airlines (as a whole) is about 0% for the past 50 years.
That's not a feature, it is a glitch is Sharps Color processing.
http://www.hdtvtest.co.uk/news/sharp-lc46le821e-lc40le821e-20100628755.htm
Unfortunately, we were soon to uncover a much more severe colour error which made our previous fears of oversaturated Yellows look truly trivial.
The first sign that the Sharp LC46LE821E had colour problems that went beyond it’s expanded colour gamut became apparent with test patterns, and later with real-world content. The edges of saturated colours — especially reds — would appear thresholded, having a strange “tizzing” effect. In fact, this anomaly almost looked like a modern-day cousin of the dot crawl we all hated in old-fashioned Composite video systems.
Near the beginning of Chapter 6 on the UK Blu-ray Disc release of “The Hurt Locker”, there is a shot of a off-cyan sky which is covered in a pleasing amount of film grain (this material originates on 16mm film). On the Sharp LC46LE821E, even without using its Colour Management controls (that is, using the company’s recommended “Movie” mode settings), the sky showed visible darker blocks dancing around in it. And in the next shot, what once appeared as one smooth sky was divided into two distinct bands. This is very surprising indeed, because Sharp has publically stated that one of the benefits of their Quattron technology is to provide smoother gradations.
Remembering that there were strange artefacts in areas of highly saturated colour, we pulled out the Blu-ray Disc of “Serenity” and skipped to Chapter 6, which features a vividly coloured, impressively lit neon city scene. Here, the Sharp LC46LE821E made a complete mess of the coloured transitions, and created obvious borders around tones which, on any other TV, would appear smooth and natural. The Sharp LC46LE821E created harsh borders around the actors, and in fact, the effect is akin to a poorly-done “green screen” effect with a fuzzy edge. The effect is best illustrated with pictures:
They got hit by a double whammy. Foreign exchange rates on one hand, and more nimble Korean competition on the other.
Strong Yen eroded their profits, while at the same time Samsung and LG made huge aggressive bets by pouring billions into new LCD and LED making equipment and benefited from economy of scale. Basically the Koreans are doing to the Japanese companies what the Japanese themselves were doing to American companies back in the 70's.
Samsung makes a healthy profit from TVs, while Sony and Sharp loses money on every TV they make.
For those that don't know, Sharp recently built their tenth-generation glass substrate and LCD factory in Sakai, Japan. This is, bar-none, the most advanced, efficient, and green LCD manufacturing facility in the world. To further lower costs, their main suppliers moved their factories just next door to the Sakai plant.
When Sharp first made this plant, it seemed like Japan would come to dominate the LCD industry, again. Sharp had deals with all the major LCD players to manufacture parts for them to use in their own brands. Notably, SONY was a huge investor in the Sakai facility. The Sakai plant was going to produce the best LCD TV components, and SONY has a long history of using top-of-the-line components in their products.
Sharp has fallen on hard times because of two primary issues:
1. The economy, stupid
2. The inexplicable and dramatic rise of the yen
When Sharp first made the facility, it made it big, and it expected big demand. BOOM! global economic meltdown. That seriously hurt Sharp, but at least they still had their deals with other companies to buy their industry-best components. Well, a consequence of the meltdown, quantitative easing, uncertainty, etc, is that the Japanese yen has skyrocketed in value.
I studied abroad in Japan from 2007-2008. At that time, I got about 121 yen per USD. Now the rate is half that. That means Made in Japan is 50% more expensive in the US (and most everywhere else) than it was, before. This is what is killing Sharp. This is what is killing all Japanese manufacturers. Modern Japan developed as an export economy, and with the yen as strong as it is, it is struggling to export. Many of their industries are diversified; for example, Honda has the ability to manufacture the same Honda Civic in Japan or the US, then ship it to whichever country it wants to sell it in depending on the exchange rates. Sharp has put all its eggs in the Made in Japan basket (not a bad decision at the time; I would certainly prefer a Made in Japan TV for a small premium, and I know others would, too), and now that basket is way too expensive to compete.
Unless the yen weakens, Sharp will fail. If they fail, somebody is going to take over the Sakai factory, because it is just too new, too advanced, and too efficient to let disappear.