What Display Daily thinks: When is a display not a display said the Cheshire Cat to Alice.
The issue with saying Sharp is exiting the display business is the same problem I’ve had since day one on Display Daily. I’m not sure there’s a display industry per se, but rather a core technology that emits light through glass, encompassing windows, portholes, shopfronts, and a myriad of distinct industries.
The reality is that being in the display business necessitates scaling up, not down. Scaling down simply isn’t viable. Let’s start with automotive, the go-to market for many. Unless you can become a Tier 1 supplier in the automotive supply chain, what’s the big opportunity here? You expect car companies to shift from buying dials and knobs for a few dollars to giving you a 15% margin on displays costing hundreds or thousands? The only way to realize profits is through direct OEM relationships, a feat only a handful of companies can achieve. There’s a reason AUO bought a German automotive parts supplier.
Then there’s AR and VR, the haven for innovation and display research but little else. If someone is profiting from AR and VR smart glasses or headsets, please have them call me. I’d like to send them flowers and congratulate them on accomplishing what has never been done before.
As for digital signage and information displays, if you can’t make TVs, then you can make these products. They’re essentially TVs by another name but for much more money. It could work. It’s niche, and with the right distribution channels and dealer network management, you can do well. There’s plenty of margin for error.
But at some point, someone will realize that the answer to when is a display not a display is never.
I never wrote this up because it was too negative, even for me. I visited Sharp’s booth repeatedly at CES 2024. It was a mess. I went back twice and stood in front of the same display with the same Sharp rep, and not once did he engage with me. He saw me, and I’ve attended enough of these events to recognize when someone is checked out.
The corporate juggling of Sharp’s display business isn’t unusual because it’s a lot of money to leave on the table. Sharp displays are still a multi-billion dollar business, but unless you have Meta’s resources and can afford to lose $40 billion trying to make Alt Reality profitable, you can’t afford to cut your way to success by focusing on short-term profitability. Significant investments in manufacturing are essential.
Who would benefit from the Sharp brand? No one. Brand equity is worth the cost of cutting corners to get products into channels and markets. Sharp could aid a company like Hisense or TCL in the TV business, but at what cost to those companies? It’d have to be a fire sale.
This isn’t just a Sharp problem; it’s the reality for everyone who isn’t among the top 6 to 8 display manufacturers over the next 24 months. Sharp is an example of how difficult it is to reshape an industry during consolidation and how painful it can be. There’s nothing positive about job losses or companies failing, regardless of the situation. It’s always a case of holding on too long or not long enough for companies that don’t survive these periods.
How to make money in the display industry without making displays remains uncertain. Restructuring your display business without spending billions is also a mystery. Sharp seems determined to believe that brand value stands alone. Only three premium brand display companies exist globally: LG, Samsung, and the ever-stoic Sony. I’m not sure Hisense and TCL can ever catch up on brand value, and I’m quite certain Sharp isn’t in the picture.
Japanese car companies figured this out long ago by creating luxury brand lines that fed into their mainstream, like Lexus to Toyota. That’s a strategy. Relying on ancient consumer brands might get you AARP discounts, but not much else.
Sharp and Foxconn Financial Results Align
Foxconn, also known as Hon Hai Precision Industry Co., recently reported its financial results for the fourth quarter of 2023 and the full fiscal year. The company achieved a net profit of NT$142.1 billion for the full year, equivalent to approximately $4.41 billion, marking a modest increase of 0.4% from the previous year.
In the fourth quarter, Foxconn reported a net profit of NT$53.15 billion ($1.65 billion), a substantial increase of 33% compared to the same period the previous year. The gross profit for the quarter was NT$113.3 billion ($3.51 billion), up 2% year-on-year. Despite these gains, the company experienced a 6% year-on-year decline in revenue for the fourth quarter.
Foxconn’s gross margin improved to 6.32% last quarter, up from 6.04% a year earlier and 6.12% in the previous quarter. Operating margin also saw a slight increase to 2.78% from 2.77% a year earlier and 2.64% in the previous quarter.
Looking ahead, Foxconn has revised its outlook for 2024 from neutral to significant growth, particularly driven by the strong demand for AI servers. The company expects the annual growth in AI server revenue to more than double, with AI servers expected to contribute significantly to its overall server business. This optimistic forecast is supported by the company’s comprehensive capabilities in AI server production, including key components like high-performance computing servers and advanced cooling technology.
Discussing SHARP’s operational direction, Hon Hai points out: “The worst is behind SHARP. Its future only gets better from here!” SHARP’s unique, innovative technology and century-old brand are very rare in the global market. SHARP has set aside asset impairment from the panel display business to facilitate its move to become asset light. Going forward, Hon Hai will cooperate with SHARP to integrate its smart products for people, vehicles, home and office into our 3+3 strategy that we actively promote, and together we will seize new opportunities in the AI technology revolution.
Foxconn Financial Statement
The company also noted progress in its electric vehicle (EV) business, with plans to start shipping its first batch of EVs next year and to sign supply agreements with two Japanese automakers later this year, positioning Japan as a crucial market for its EVs
For its part, Sharp’s financials do reflect the positivity espoused by Foxconn with a focus on returning to profitability.
The only issue seems to be in displays which is dragging the whole company down. The result is a roadmap that see drastic capacity cuts, and personnel cuts.
Over at Sixteen Nine, the digital signage blog, one author had experienced the backlash of saying that Sharp was getting out of the TV business. I know how that feels, but at least the author got a direct response from Sharp. But, it was more to do with the perception that the news engenders for Sharp’s professional AV business.
From Sharp’s perspective, the recent shutdown of a TV production facility in Japan is not an indication of broader issues within the company, particularly regarding its professional AV business. Mike Marusic, President and CEO of Sharp Imaging and Information Company, clarified to Sixteen Nine that the closure is specific to a 10th generation plant in Osaka, which has not been manufacturing TVs for some time and incurred a non-operating loss of $330 million for Q1. This decision is seen as a necessary step rather than a sign of wider financial troubles.
Marusic emphasizes the promising outlook for Sharp’s overall strategy, focusing on profitable branded product lines. Despite exiting the branded TV market in the US, Sharp has re-entered on a smaller scale and aims to grow this competitive segment. The pro display market is acknowledged as more lucrative than TVs, and Sharp NEC is experiencing significant growth in digital signage and prosumer displays, especially in sectors like hospitality and bars.
Sharp NEC leverages a substantial portfolio of intellectual property for pro displays, aiming to blend their product categories effectively. The joint venture plans to phase out the NEC name eventually and operate solely under the Sharp brand. Their presence at upcoming industry events like InfoComm will highlight LED displays, flat panel collaboration displays, and innovative color e-paper displays, reflecting their strategic focus and product development.
