Foxconn and Sharp to Launch 60-inch LCD-TV for $1000 – by Ken Werner

If you’ve been reading HDTVexpert.com or looking in at your favorite on-line or brick-and-mortar electronics retailer, you know that the very-large-screen segment – 55 inches or more – of the TV marketplace is hot. Prices are dropping rapidly and unit sales are growing fast. Furthermore, this is the only market segment in which both panel and set makers can make more than a hair’s breadth of profit.

Now, before we all get too excited, I should remind you that the 55-inch-and-over segment constitutes only 6 or 7 percent (in units) of the overall TV market, perhaps rising to 10% by 2015, according to DisplaySearch estimates. The 60-inch-and-over part of the market is perhaps 1% this year. Still, that’s the most profitable 1%, it accounts for over 2 million TV sets, and it’s growing.

Sharp, Foxconn, and Japanese Flags fly over Sharp facility in late August 2012, but the agreement for Foxconn to purchase a stake in Sharp was not finalized.

Now, what would happen to this segment if the panel maker that has the only

Sharp, Foxconn, and Japanese flags fly over Sharp facility in late August 2012, but the agreement for Hon Hai to purchase a stake in Sharp was not finalized.

Generation 10 LCD fab in the world – and is therefore uniquely equipped to make 60-inch panels less expensively than anybody else – were to collaborate with the world’s largest electronics contract manufacturer to make 60-inch LCD-TV sets? There is a good chance they could make them at a lower cost than anyone else, and dominate the market. Well, that is exactly what Hon Hai Precision Industry (Foxconn) of Taiwan and Sharp Electronics of Japan intend to do.

In early October, Jalen Chung and Francis Huang of Taiwan’s Central News Agency reported that Hon Hai may launch such a TV set as early as the end of October, with volume production beginning in early 2013, citing “market sources close to the company.” Hon Hai would not confirm an exact timetable for the official launch, but did say it could be imminent, and it confirmed that the LCD panels would come from Sharp’s Gen 10 plant in Sakai, 46.5% of which is owned by Terry Gou, Hon Hai’s Chairman.

Julian Ho and Alex Wolfgram of Digitimes added that the sets will be sold under the brand name SIO, quoting industry sources. Ho and Wolfgram also reported that the sets are likely to be priced at US $999 when they reach the North American market, but that may not happen for a while. CNA’s Chung and Huang reported that the initial sets, which will contain Internet TV functions, will first be sold in Taiwan and China before Foxconn promotes them on the global market.

Prior to the launch, Hon Hai intends to offer 60-inch TVs to hundreds of its employees at a special price of under NT $40,000 (US$1,365) per unit, which may be less than half the price set by other suppliers in the Taiwanese market.

Hon Hai and Sharp are still working to renegotiate the terms of an acquisition deal by which Hon Hai and some of its affiliates would buy nearly 10% of Sharp. In March, Hon Hai agreed to acquire the stake for ¥67 billion, or ¥550 per share. Since then, though, Sharp’s shares plummeted, reaching a low of ¥164 in mid-August. Hon Hai is understandably making use of a clause that permits it to renegotiation the terms of the acquisition. Sharp, in very deep financial trouble, has recently obtained financing that should, according to industry sources, give it time to finalize its agreement with Hon Hai.

But now, there are mutterings in the industry that the existing major TV players may not be able to compete with the Hon Hai-Sharp large-screen-TV behemoth, and that supply-chain participants will have to scramble to find places in a significantly restructured manufacturing environment . With that in mind, we can wonder what the new SIO brand stands for? Could it be “Sharp In Terry GOu’s pocket?”

Ken Werner is Principal of Nutmeg Consultants, specializing in the display industry, display manufacturing, and display technology.  You can reach him at kwerner@nutmegconsultants.com.