A Big Topic Appears Just in Time!

I was just starting to look the topics that I had lined up for my Display Daily today (I keep a note of any I think of) when I took a look at my email, having ploughed through 350 filtered news emails to catch up with my ‘What Bob Saw’ posts. What I saw surprised me, but maybe it shouldn’t have!

The story I saw was the announcement of a new joint venture to allow Sharp to acquire the Display Solutions business of NEC. That’s quite a big deal, especially in the world of digital signage and large format LCDs, but for other areas as well. (NEC and Sharp Announce Joint Venture to Combine Display Solution Businesses)

NEC Has a Long History in Displays

NEC has had a long history in displays. Back in the ’80s, the company developed PCs and made CRT monitors. I’m so old that I remember that the company had some very nice monitors for text on their IBM-compatible PCs that ran at higher scan frequency (24.75KHz rather than the 15.75 KHz of IBM’s CGA) to give text with 640 x 400 resolution rather than the 640 x 200 resolution of the IBM version, so the text was much better, while maintaining software compatibility. It had a big breakthrough when it developed Multisync monitor technology in 1985 and that established it as a substantial international display supplier separately from the computer business. The business was specially successful, at that time, in the US, if I remember correctly, as well as in NEC’s home market in Japan, where it was a dominant computer supplier.

NEC wasn’t just a monitor supplier, it also had a projector business, including, eventually, digital cinema.

As Japan came under pressure in the display business from Taiwan and Korean suppliers and in a move that has been a number of times from Japanese corporates, NEC set up a joint venture, announced in September 1999, with Mitsubishi as NEC Mitsubishi Electric Visual Systems Corp (NMV). It became an entity early in 2000. At that point, NEC was still a key actor in the LCD business, although within a few short years, the company realised that it was ‘just a finance game’ and withdrew from the race to build new fabs.

On 1st April 2005, NEC bought out the Mitsubishi shares in the JV and the company became just a part of NEC. As the company said at the time, the sun was setting on CRT with LCD clearly as the future. (In looking at our archive, in an interview in 2005, the firm said it would be five or ten years before it would make OLED monitors!)

Since then, NEC has developed its display business, with an increasing shift to larger displays and with a declining share in desktop monitors. Part of the reason for this is the opportunity for added value in digital signage and other public display applications, whereas added value is much harder to find on the desktop.

NEC was able to develop its digital signage business although it was somewhat handicapped by a lack of business in the TV segment, so it had only limited technology and no volume supply chain for the SOCs needed to support Smart professional displays, unlike Samsung, LG, Philips and others. It developed a clever strategy to exploit the Raspberry Pi as an add-on.

Over the years, NEC has been categorised by really tight work and collaboration with its channels and value added partners, with the businesses outside Japan using local management to match business policies to the channels and business opportunities available in each region.

Sharp Focused on the Supply Chain & Vertical Integration

Sharp, on the other hand, continued to try to lead as an LCD business, having pinned its colours to that mast many years ago. As we have reported over the years, the company had something of a technical triumph being the first to G6 in fabs, when it got a really strong position in LCD TV, and the firm was years ahead of others in getting to G10 in its Sakai plant. That gave a real advantage in very large displays. However, as has been widely reported, Sharp got into a lot of financial trouble and eventually effective control of the company was taken over by Foxconn/Honhai.

Sharp had been trying to develop its digital signage business, but its huge long term success as the biggest brand in the Japanese LCD TV market seemed to be a real barrier to being able to develop the digital signage business. As an OEM supplier, Sharp had not been successful in building strong supply relationships with other brands. The lack of long term interest in building long term TV partners was clear when Sharp stopped supplying Samsung with LCDs for TV several years ago, leaving the Korean company with a gap in its supply chain.

To develop its vertical strategy, Sharp promoted its TV business in China and in the professional displays field, it acquired IWB specialist, Smart and also struggling US display brand, In Focus. The extra resources and faster product development available to the Sharp digital signage business was quite obvious early on. However, Sharp struggled to really develop its digital signage business to the kind of volume that I assume Foxconn had been looking for. We were surprised to see that Sharp pulled out of the ISE show this spring – a sign that perhaps revenues weren’t where Foxconn wanted to be.

So, NEC, which is increasingly a systems and software company, is able to move away from this hardware-based business and Foxconn will get another channel for getting panels from its LCD business into products. From the point of view of each partner, that’s a win. There are bound to be questions about how the different cultures can be merged, but given that NEC’s business is much bigger than the Sharp public display business, it should be clear which the senior partner is. Combining the two cultures under Foxconn ownership may be more of a challenge!

The big challenge for the combined business may well be how to develop in the LED business. NEC has been investing, with the purchase of SQuadrat, but it’s not obvious to me how the combined companies will be in much more of a stronger position than NEC on its own. We’ll see! (BR)