Posts Tagged ‘Sharp’

Turn Back The Clock?

A recent story in the Nikkei Asian Review states that Hon Hai Precision Industries – the new parent company of Sharp Electronics – is considering building an LCD panel facility in the United States. The finished panels would likely be intended for televisions.

According to the story, Hon Hai is responding to President Trump’s call to bring back jobs to the United States. When Hon Hai investment partner SoftBank Group’s chairman Masayoshi Son met with Trump last month, he said that both companies would make “significant investments” to create new jobs in the U.S.

In a related story on the CDRinfo.com Web site, Hon Hai chairman Terry Gou was quoted as saying that he’d consider going ahead with such an investment if “the U.S. is willing to offer land at a cost of US $1 for building the panel plants.” Apparently Apple is also part of the discussion and mentioned as a joint investor.

Gou was also quoted in the CDRinfo story as saying that “…U.S. President Donald Trump should love to see a vertically integrated industry such as panel manufacturing grow and develop in the country.”

Coincidentally, Hon Hai and Sharp are getting ready to break ground on a Gen 10 LCD fab in Guangzhou, China at a cost of $8.69B. That plant is scheduled to open in the fall of 2018. People familiar with the project said the proposed U.S. LCD fab would be of the same size and generation.

While this is an intriguing story, there are caveats. First off; LCD factories are mostly automated – they have to be, considering the manufacturing precision involved – so there wouldn’t be all that many permanent jobs created once construction is completed. (The same thing applies to Intel’s proposed semiconductor fab in Arizona.)

Second, most of the permanent jobs will likely require college degrees in the sciences (physics, engineering, and chemistry), aside from basic factory functions, shipping, and facilities maintenance.

But the biggest obstacle to building the plant will be the finished cost of the panels. There’s a reason why the LCD panel industry (and with it, television manufacturing) is migrating to China: Manufacturing costs there are much lower because labor rates are lower. That, in turn, will make Sharp-branded televisions much more expensive than those coming from Korea and China.

Consumers have been conditioned to expect ever-lower TV prices with ever-larger screens. Consider that you can already buy a 55-inch “smart” Ultra HDTV for $500 now: How will a US-made UHDTV compete against that price?

Consider also that in the 4K TV world, Samsung has over a 30% market share and LG has another 15%. Conversely, Sharp’s current TV market share is less than 1% and its brand doesn’t have anywhere near the cache it once had. So Hon Hai would have to find other customers for its panels to avoid underutilization of plant capacity.

Matters are further complicated by the fact that Hisense currently controls the marketing rights for the name “Sharp” in the United States and has no intention of giving them up. That little dust-up is why Hon Hai cut off supplies of VA LCD panels to Hisense last fall, forcing them to look elsewhere for a supplier.

Of course, there’s been plenty of talk in Washington about slapping 20% tariffs on foreign-made goods. That cost would be passed along to customers, and don’t you think Samsung and LG will adjust their prices as needed to maintain their dominant market shares? The net result would be that Sharp-branded LCD TVs would still languish on store shelves while Samsung, LG, Sony, Hisense, and TCL continued to dominate the market.

The recent election was filled with jingoistic slogans like “Bring Back America.” Well, then – which one? The America of the mid-1980s where the television manufacturing business involved lots of workers on assembly lines, hand-wiring CRT televisions and installing them into cabinets?

Sorry, that ain’t gonna happen. The US TV industry was pretty well decimated by 1986 when Zenith finally threw in the towel on TV production stateside. (Zenith was later acquired by LG Electronics.) The Japanese had our number. Then, the Koreans pulled the rug out from Japan, starting in the late 1990s. And now it’s the Chinese TV manufacturer’s turn to run with the ball.

The widespread availability of inexpensive LCD panels from China is a big reason why you can now afford to buy a 65-inch 4K TV for less than $800, or a 4K HDR model for about a grand. For that matter, you can now pick up a 50-inch Full HD (1080p) LCD TV for less than $300, and 42-inch sets have dropped below $200.

Question: Do you really want to pay 30 – 40% more for a given TV just because it’s made on this side of the Pacific Ocean? I didn’t think so. More expensive TVs will prompt people to delay their TV upgrades for a longer time period, which is exactly what Hon Hai doesn’t want to happen, and can’t afford to have happen if they’ve sunk a few billion dollars into an LCD fab.

Time marches on..

You Don’t Need A Weatherman

Just when you think you’ve seen it all, you’re reminded of just how sharply the balance of power in consumer electronics manufacturing has shifted to China. In a New York Times story from February 2, Sharp Corporation – a Japanese colossus in everything from LCD displays to office products and personal gadgets – let it be known that they are seriously considering a sale to Hon Hai Precision Industries of Taiwan.

You may not recognize the name Hon Hai, but you may know one of their subsidiaries: Foxconn, the manufacturer of just about everything with an Apple logo on it (IPhones, iPads, MacBooks, Apple TV, etc.) And Hon Hai is no stranger to Sharp, having bought nearly 50% of the latter’s Gen 10 LCD fab capacity in Sakai, Japan a few years back.

Why, and how? Sharp did not fare well during the global recession. Sakai, the world’s largest LCD fab, opened in 2008 as the world economy was tanking, affecting demand for all things electronic – especially liquid-crystal displays. Because Hon Hai (er, Foxconn) uses VA-type glass in its products, chairman Terry Gou approached the company with a deal it couldn’t refuse – except that Sharp got back just 20 cents on the dollar for its $4B investment in Sakai.

Several years of brutal red ink for Sharp brought the company to where it is today. Having borrowed hundreds of millions of dollars from Japanese banks to stay afloat as its worldwide TV business evaporated (and having sold small minority shares to Qualcomm and Samsung along the way to raise additional cash), Sharp’s day of reckoning has arrived.

Those were the days, my friend...we thought they'd never end...

Those were the days, my friend…we thought they’d never end…

The company, which ten years ago had a 21% worldwide market share in LCD TV shipments, sold its North American TV business to Hisense last year, along with an assembly plant in Mexico. The Sharp name will still be found on LCD TVs made by Hisense in China and southeast Asia, but largely as a bargain brand.

Not surprisingly, Japanese banks are reluctant to throw more good money after bad. According to the story, Sharp has seen $10B in losses over the past five years, reporting a net loss of $200M for the most recent quarter. There is a home-grown suitor – the Innovation Network Corporation of Japan (INCJ), a government-backed organization that is trying to keep some semblance of display R&D and manufacturing in Japan.

Trouble is; Hon Hai’s offer of $5B is twice as much as INCJ is willing to put on the table. INCJ, though, has said they will push to line up more financing from Japanese banks. But given the staggering losses incurred by Sharp, Panasonic, and Sony a few years ago, combined with Toshiba’s “cooked books” and exit from the television market and similar departures by Mitsubishi and Hitachi, means the old ways of doing business in Tokyo are probably over for good.

And things aren’t all rosy for Hon Hai, either. Although they are a strong player in consumer electronics – perhaps the dominant player in manufacturing – their profit margins have been shrinking in recent years. The company has branched into electric cars and robotics to diversify, but acquiring Sharp could prove to be a bit too much to swallow.

This is the next

This is the next “gold rush” in display applications.

Gou would love to have that Gen 10 plant running in China, and if he’s as savvy as I suspect, he can already see the enormous market opening up for transportation displays – cars, buses, trains, planes, ships, trucks, you name it – around the world. These displays are small to mid-size, resulting in more lower-cost cuts from larger motherglass and higher yields (and probably higher sales numbers than TVs and computer monitors).

This trend became obvious a few years ago at CES and this year, it went off the charts. Consider the market for automobiles alone – virtual dashboards, center consoles, GPs, rear-seat TVs – and you can see the potential to make billions of dollars. But you’ve gotta have enough reasonably-priced “glass” to do it.

Sharp’s CEO Kozo Takahashi said the company would take until the beginning of March to make its decision. Should the board opt to take Gou’s offer, that decision could turn out to be a tipping point for other Japanese manufacturers who are struggling to see profits in display-related manufacturing and sales.

In any case, this should convince you that the landscape for consumer electronics really is changing, and changing in a BIG way. You’ll see increasing numbers of TCL and Hisense TVs in big box stores this year, competing with the “Big 3” – Samsung, LG, and Sony. You’ll also see more Chinese-branded mobile phones from carriers, along with personal electronics like smart watches.

Like Bob Dylan sang so many years ago, “You don’t need a weatherman to know which way the wind blows…”

4K, Collapsing Prices, and the Declining Importance of Hardware

As I write this, the 2015 season of the National Football League is about to get underway, with last year’s Super Bowl champion New England Patriots taking on the Pittsburgh Steelers. If you’re not a football fan, why should you care?

Simple: Football, more than any other sport or event, drives the sale of televisions. And the TV business is in a major funk right now.

According to IHS’ latest survey of the global television market, worldwide shipments of TVs fell an astounding 8 percent Y-Y during the second quarter of 2015. Even though LCD TVs now account for almost 99% of all TV shipments, “…LCD TV sales have not made up for the lost volume of cathode-ray tube (CRT) and plasma televisions, which have largely left the marketplace.”

The one bright spot? 4K. The IHS report states, “4K TV was a bright spot in the global TV market, with unit shipments growing 197 percent year over year in Q2 2015, to reach 6.2 million units. The growth in 4K TVs is the direct result of increased price erosion and more affordable tiers of 4K models becoming available.”

I’ve written on numerous occasions that we’re on the cusp of an industry switchover from 1080p resolution to Ultra HD (3840×2160) for precisely this reason, plus the fact that it’s becoming increasingly difficult to make any money on the manufacturing and sales of 1080p-resolution LCD panels. That’s part of the reason that Sharp – once the premier brand of LCD televisions – finally threw in the towel and exited the North American television business, selling their Mexican factory and “Sharp” brand to Hisense.

Need proof? Check out the most recent HH Gregg and Best Buy circulars. You can now buy a 48-inch Haier 1080p LCD TV for $298 or a 60-inch LG 1080p smart TV for $898. Want Ultra HD resolution instead? Samsung’s got a curved 55-inch smart model for $1198, and a 60-inch smart set for $1498.

Samsung has slashed the prices on its new S-line of HDR Ultra HDTVs by as much as 20%.

Samsung has slashed the prices on its new S-line of HDR Ultra HDTVs by as much as 20%.

But here’s the kicker: Samsung’s HDR Ultra HDTVs (S-UHD) are almost the same price. A 50-inch model (UN50JS7000) is tagged at $1098 by HH Gregg, while the 55-inch version is $1298. Too expensive? Sharp’s got a 43-inch Ultra HD offering for $598, a 50-inch set for $748, and a 55-inch version for $848. (Not to be left out, LG has cut the price on their 55-inch smart Ultra HDTV to $998, and they’ve also got a 49-inch UHD set for $798.)

Now, step back from that mass of numbers, and think about this: Those are insanely low prices for Ultra HDTVs, which were tagged around $15 – $20K when they first came to these shores in 2012. I know of several friends and acquaintances that had to replace older TVs recently, and every one of them bought an Ultra HD set because of these falling prices.

If overall sales of TVs are falling but 4K TV sales are increasing, it doesn’t take a weatherman to see which way the wind is blowing: 4K and Ultra HD are rapidly taking over the TV marketplace for sets larger than 42 inches. This is happening so quickly that by the end of next year, ALL TVs larger than 50 inches will be Ultra HD models.

There’s a bigger message here. The money isn’t in hardware anymore – it’s moving to software. I find it hard to believe that I would spend more in a year for cable TV and Internet service than the cost of an Ultra HDTV, but that’s exactly what’s happening. Content is king, and who cares about the hardware?

So, why are TV sales in decline? It could be for a very simple reason, and that is the average household has a large-enough TV with enough bells and whistles that they see no reason to upgrade. If you already own a 55-inch or 60-inch 1080p set with “smart” functions ( and the all-important Netflix streaming), then the speed of your Internet connection is much more important than adding another 5 inches in screen size or quadrupling your screen resolution.

There’s a corollary in the world of tablets, where sales and shipments are also slowing down much faster than analysts predicted. There are any number of reasons why, but the two most likely culprits are the shift in preferences for larger smartphone screens (“phablets”) and the fact that people just hang onto tablets longer (at least, until their batteries die), often passing them down to children or off to relatives when a new model is purchased.

This shift to 4K and Ultra HD resolution is also impacting the commercial AV industry, which is heading for some serious interfacing issues. More and more of the large displays that will be installed will have Ultra HD resolution. And that will create a major headache for integrators, as the predominant interface for pro AV is still HDMI 1.4, even though version 2.0 was announced two years ago.

None of this is good news for the projector manufacturers, who are struggling to defend their turf from the large, cheap LCD displays. Unlike panel manufacturers, projector brands are moving slowly to adopt 4K resolution, which isn’t surprising because of the cost involved to tool up and manufacture microdisplays with 4K resolution and the much smaller market for projectors.

As for the naysayers who still think 4K is a fad, I would just advise them to wake up and smell the coffee. The world of consumer electronics absolutely drives the world of commercial AV – what’s happening over there is going to happen here, and that means you as an integrator will be installing more and more displays with UHD resolution; from desktop monitors and TVs to single-panel and tiled wall-mounted displays.

Count on it!

 

 

 

We’re Not Having Fun Anymore…

Last Friday (7/31), Sharp Corporation made the announcement that they would finally throw in the towel and withdraw from marketing and selling televisions in “the Americas,” opting to sell the company’s LCD TV manufacturing plant in Mexico to emerging Chinese CE giant Hisense.

Sharp also indicated that it would allow Hisense to sell TVs on this side of the Pacific that are branded with the Sharp name. (Hitachi, JVC, and Toshiba have similar arrangements.) This announcement came just months after the announcement that industry marketing veteran Peter Weedfald was being hired by the company, presumably to try and turn the U.S. consumer electronics operation’s fortunes around.

Sharp also had a nice line show of nine new Ultra HD (4K) TVs back in May, signifying a commitment to the U.S. TV market. Now, it appears everything was for naught.

This has to be quite a blow to the ego of the company that basically created the LCD television business, and that just 9 years ago held a 21% worldwide market share in LCD TV shipments. Today? They’re not even on the radar, having ceded ground to Samsung, LG, Sony (who also is struggling), and most recently, Hisense and TCL.

There are nine new Ultra HDTVs in the Sharp line now, ranging from 43 inches to 80 inches.

What will happen to Sharp’s new line of Ultra HDTVs?

But it’s the right move. The company’s world-largest Generation 10 LCD fab in Sakai, Japan became a white elephant almost immediately as the world went into a recession in 2008-2009. Pressed for cash, Sharp sold 46% of the Sakai fab capacity to Hon Hai Precision Industries for about 20 cents on the dollar not long after the plant opened.

Several years of red ink followed, as did numerous rounds of financing. In the 1st quarter of this year (April – June), Sharp booked an operating loss of 28.8 billion yen ($231.87 million), down from a 4.7 billion yen profit a year prior, with a net loss of 34 billion yen ($270 million). The company still maintains it will be profitable to the tune of 80 billion yen ($644 million) by the end of March 2016.

According to a Reuters story, Sharp’s CEO Kozo Takahashi was “…open to major restructuring including some kind of strategic deal for its LCD business.” It’s well-known that Hon Hai CEO Terry Gou would love to buy the Sakai facility – he already owns almost 50% of its capacity, and Hon Hai subsidiary Foxcon sources LCD glass from Sharp for various Apple i-products. Gou also stated earlier this year that he would be willing to put more money into Sharp in exchange for a seat on its board.

While Sharp continues to wrestle with black ink, Sony posted what appeared to be positive financial results for its 1st quarter. The once-formidable CE brand logged an operating profit of 97 billion yen ($781 million), far exceeding the estimates of financial analysts.

There’s no question that camera sensor manufacturing is a lucrative business for Sony. Hundreds of millions of cameras and phones use Sony sensors, and the company announced a few months ago that it would expand sensor manufacturing capacity at two plants in Japan.

The strong first quarter was helped by an increase in operating income for its gaming (PlayStation) division of 350% to 19.5 billion yen ($153 million). So everything is coming up roses in Tokyo – right?

Not really. Sony’s beleaguered mobile phone division strung up a loss of 22.9 billion yen ($184 million) for the same quarter, and according to a Reuters story, the company is now predicting a loss of 60 billion yen ($483 million) for the fiscal year that ends next March, citing “a significant decrease in smartphone unit sales resulting from a strategic decision not to pursue scale in order to improve profitability”.

Drilling down into Sony’s Q1 FY2015 Consolidated Financial Results, the Home Entertainment and Sound group posted 168.9 billion yen ($1.36 billion dollars) in sales during Q1, with operating income of just 7 billion yen ($56 million). (That is a margin of 4.1%.) Sales were down 13.8% from the same period last year due to a “…decrease in unit sales of LCD televisions, mainly in the mid-range” and a “decrease in home audio and video unit sales reflecting contraction of the market.”

For all of 2014, Sony sold 14.6 million LCD TVs. Their current forecast calls for 11.5 million to be sold by the end of next March, a drop of 21% Y-Y. (2.6 million LCD TVs were sold by the company in the first quarter.) The TV business has long been a cash-sucker and Sony has been racking up losses in this market segment for a decade.

If Sony was to cut loose its mobile and home entertainment businesses, it would be quite the profitable company. For that matter, even the digital camera segment is seeing a downturn, as the year-long forecast for camera sales (5.9 million units) represents a drop of 30% from last year’s numbers – which were 26% down from 2013.

Aside from PlayStation, the long-term view for Sony’s consumer business isn’t good. Cameras in general are being displaced by smartphones, and even powerhouses like Samsung are seeing their mobile phone business decline as Chinese companies gain more market share in Asia.

And it’s pretty clear what’s happened to the Japanese TV business – only Sony, Sharp, and Panasonic retain a presence in the United States, and Sharp just announced it’s getting out. Look for Panasonic to do the same by year’s end, as their market share is miniscule and supporting continued sales of televisions doesn’t make much sense financially.

That just leaves Sony, who once proudly exclaimed that they had a chain of products “from lens to screen.” Well, that was in the good old days, when everyone was having a great time selling consumer electronics.

But we’re not having fun anymore…

The Dog Days of Summer…and UHDTV

Ahhh, summertime: When everyone’s thoughts turn to cookouts, the beach, ice cream, baseball games, driving with the top down (or moon roof open), miniature golf – I could go on, but you get the idea.

One of the things most people are NOT thinking about is buying a new TV. Sure, there’s plenty to watch, but most of us would rather be outside in the nice weather. (Kayaking is my thing this time of year).

Even so, prices continue to drop across the board on all screen sizes, even on UHDTVs. Consider HH Gregg’s flier from last Sunday, where Sharp is now advertising its new line-up of discounted Ultra HDTVs for some eye-popping prices. How about $600 for the 43-inch LC43UB30 “smart” TV? Or $800 for the 50-inch LC50UB30? Both of those prices represent $200 discounts off full retail, which was already low.

There’s even a 55-inch model, the LC50UB30, for a grand. That’s Vizio territory when it comes to pricing and shows you how determined Sharp is to get back in the TV game and recapture some of the old magic from a decade ago.

Even the newest technologies are being discounted. Samsung’s HDR-ready S-series of UHDTVs are seeing substantial price cuts, with the 55-inch UN55JS8500 trimmed by $1,000 to $1998 and the 65-inch UH65JS8500 marked down to $2998. Curved models have seen an even bigger cut of $1500 off full book (UN55JS9000 is $2498 and UN65JS9000 is $3498).

Even LG’s new OLED TVs aren’t immune. The company ran a week-long promotion earlier this month with substantial discounts. The 55EG9600 was dropped to $5,500 from $6,000, while the 65EG9600 saw its price cut by a whopping $2,000 from $9,000 to $7,000.

How low can you go?

How low can you go?

And back around the 4th of July, their older 55EC9300 1080p OLED TV saw a price drop to $2,300. That price has since risen back to $2,500, which is quite a discount from when it first came out two years ago and was tagged at $15,000!

Don’t need a UHD set yet? Haier would be happy if you bought one of their new 50E3500 50-inch 1080p LCD TVs, and it will only set you back $370.00 – which works out to an amazing $7.40 per diagonal inch, a new low for LCD TVs. If 50 inches isn’t big enough, Haier’s got a 55-inch model (55E3500) for $400, which is almost as good a deal.

Given the number of UHDTVs that are now priced at or below $1,000, you can expect the shift from 1080p to 4K in larger TV screen sizes to accelerate. I had figured we’d see the majority of TVs 50 inches and larger move to 2160p resolution by the end of 2017. Now, I’m beginning to think it will happen even faster – maybe by the 4th quarter of next year.

Either way, there’s no question that your next TV purchase will bring you a lot more bang for the buck. With 43 inches now the most popular screen size, you’ll be able to buy two 1080p models at a time for what one cost a year ago. And the way things are trending, you may want to consider making the move to 4K if you are upgrading over the holidays.

For now, you can just enjoy swinging in your hammock with a nice cool glass of lemonade while the birds chirp, the bees buzz, and July turns into August. There will be plenty of time to ruminate on the features sets of new TVs this fall…