Sharp changes plans for US factory
There have been a significant number of articles published in the US and foreign press concerning the potential for Sharp (6753.JP) to build a TV display production facility in the US, with some very specific details as to location and size. That said, we have expressed our doubt as to whether a TV panel production line would be built in the US, particularly focusing on both the cost structure and the display infrastructure needed to make such a facility profitable. Our alternative was a TV assembly plant, which would take display panels built by Sharp in Japan and assemble them into TV sets for US distribution, which could be a more logical and potentially more profitable use of the Trump administration and local government ‘encouragements’ that would be offered for such a project. We note also that Sharp has previously licensed the Sharp brand name in the US to Chinese TV giant Hisense (600060.CH), who refused to relinquish such rights back to Sharp when it was acquired by Foxconn (2354.TT), which reduces the market opportunity for Sharp in the US.
However…the Japanese press is now indicating that Sharp is now considering building a small panel display plant, primarily for smartphone and industrial applications. The project, which has been estimated at $7b (either for TV or small panel displays), continues to be negotiated between the company and the various state and city governments vying for the plant’s location, despite the press’s previous insistence that Pennsylvania had been selected as the state of choice. That said, given the global nature of the smartphone business, such a plant would likely be producing smartphone displays that would also be shipped to China, which would be a considerable pricing burden against those produced on the mainland, and Apple (AAPL), who has encouraged other suppliers to set-up factories in the US in the past, has found that the efficiency of those facilities is considerably lower than what they see in Asia. Even with Apple’s $1b advanced manufacturing fund that it recently set up to encourage US job growth, there remains the issue of cost structure for local projects such as the potential Sharp facility, and Apple has said publicly that it would likely continue to source phones overseas even if tariffs were imposed on smartphone imports as it does not believe the US is suitable for competitive smartphone production.
Of course, despite the photo-ops and handshaking in the press, Sharp is also being wooed by other countries, in particular India, where the government is also offering ‘encouragements’ to Sharp/Foxconn and cites lower labor costs and a rapidly growing local market, so Foxconn management has little incentive to rush toward a final decision, allowing the players to up the stakes repeatedly. Of course it would be helpful to create jobs in the US in the display industry, but the altruistic nature of panel producers and CE brands is not one that can be counted on when making decisions that involved billions of dollars.
However…the Japanese press is now indicating that Sharp is now considering building a small panel display plant, primarily for smartphone and industrial applications. The project, which has been estimated at $7b (either for TV or small panel displays), continues to be negotiated between the company and the various state and city governments vying for the plant’s location, despite the press’s previous insistence that Pennsylvania had been selected as the state of choice. That said, given the global nature of the smartphone business, such a plant would likely be producing smartphone displays that would also be shipped to China, which would be a considerable pricing burden against those produced on the mainland, and Apple (AAPL), who has encouraged other suppliers to set-up factories in the US in the past, has found that the efficiency of those facilities is considerably lower than what they see in Asia. Even with Apple’s $1b advanced manufacturing fund that it recently set up to encourage US job growth, there remains the issue of cost structure for local projects such as the potential Sharp facility, and Apple has said publicly that it would likely continue to source phones overseas even if tariffs were imposed on smartphone imports as it does not believe the US is suitable for competitive smartphone production.
Of course, despite the photo-ops and handshaking in the press, Sharp is also being wooed by other countries, in particular India, where the government is also offering ‘encouragements’ to Sharp/Foxconn and cites lower labor costs and a rapidly growing local market, so Foxconn management has little incentive to rush toward a final decision, allowing the players to up the stakes repeatedly. Of course it would be helpful to create jobs in the US in the display industry, but the altruistic nature of panel producers and CE brands is not one that can be counted on when making decisions that involved billions of dollars.
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