What’s with Sharp? OLED? 8K?
Rumors that Sharp (6753.JP) will be increasing its investment in OLED are circulating, giving investors hope that the company can participate in Apple’s (AAPL) expected transition to OLED technology for their iPhone line, yet only days ago, Sharp indicated that it was going to focus on the nascent 8K TV market after agreeing to build a new Gen 10.5 LCD fab in China. Has Sharp changed its mind or is management tossing the spaghetti against the wall to see what sticks?
Sharp’s new owners have made a big acquisition, more than likely on the general assumption that it would be good for the number one worldwide assembler to have its own display production capabilities. But the problem is, they already do have those capabilities, as they own Innolux (3481.TT), who has a 15% capacity share in the display space. If you add in Sharp, they control over 20% of display capacity, only slightly below LG Display’s (LPL) 21.8% share and substantially above Samsung Display (pvt), AU Optronics (AUO) and BOE (200725.CH). That is a lot of capacity to control, especially as the combined group has fabs that cover all substrate sizes from Gen 1 to Gen 10, and while Foxconn has indicated that they want to use a portion of that capacity to resurrect the Sharp brand, that still leaves them with lots of production assets, some of which (more Sharp) are being underutilized.
Historically, Foxconn has left Innolux to manage itself and develop its own customer base, while still supplying ~28% of Foxconn’s display needs, while Sharp has been mismanaged by its previous owners for many years. Now, Chairman Terry Gou, has to decide how things will work for the larger entity and what direction it will take. Thus far, it seems that the new management has taken a few bold steps. First, cutting out a big customer or two (Samsung and Hisense (600060.CH)) from its display customer list to allocate capacity to the Sharp TV brand where he set a target of 10m units this year and 20m next, and second, announcing the commitment to building a Gen 10.5 fab in China that will focus on 8K TVs. All of this was done while shaking the US president’s hand and committing to building something in the US, and expanding a meager OLED effort in order to stay in the sights of Apple, who is expected to convert some iPhone products to the technology.
As any good chairman, Mr. Gou is doing his best to appeal to as many factions in the display space as possible, but there comes a time when actual decisions become more important than rhetoric, and it would seem that Foxconn is still unwilling to give specifics, in similar fashion to the new administration in the US. Mr. Gou’s philosophy of “we serve where there is a customer” has served him well given his company’s position as Apple’s primary assembler and his net worth of $7.5b US, but its time to lay out just what you intend to do with this massive display asset base and make a commitment as to the direction of those assets. If it’s going to be focused on TV, than say so, don’t use 8k as a selling point. If its going to be OLED, then make a real commitment, not just enough to give people the impression that you are in the game. If you want to use all the assets for building Sharp/Hon Hai (2317.TT)/Foxconn brands, so be it, but take the shot now. Samsung did it with small panel OLED when no one thought it could work (it did), LG is committed to OLED for TV for the next few years, and everyone assumes that TVs are going to continue to get bigger and cheaper and are building Gen 10+ fabs to compete. Sharp’s mistakes are their mistakes, it’ time to decide, and maybe make a mistake or two, but you can’t please everyone. JOHO
Sharp’s new owners have made a big acquisition, more than likely on the general assumption that it would be good for the number one worldwide assembler to have its own display production capabilities. But the problem is, they already do have those capabilities, as they own Innolux (3481.TT), who has a 15% capacity share in the display space. If you add in Sharp, they control over 20% of display capacity, only slightly below LG Display’s (LPL) 21.8% share and substantially above Samsung Display (pvt), AU Optronics (AUO) and BOE (200725.CH). That is a lot of capacity to control, especially as the combined group has fabs that cover all substrate sizes from Gen 1 to Gen 10, and while Foxconn has indicated that they want to use a portion of that capacity to resurrect the Sharp brand, that still leaves them with lots of production assets, some of which (more Sharp) are being underutilized.
Historically, Foxconn has left Innolux to manage itself and develop its own customer base, while still supplying ~28% of Foxconn’s display needs, while Sharp has been mismanaged by its previous owners for many years. Now, Chairman Terry Gou, has to decide how things will work for the larger entity and what direction it will take. Thus far, it seems that the new management has taken a few bold steps. First, cutting out a big customer or two (Samsung and Hisense (600060.CH)) from its display customer list to allocate capacity to the Sharp TV brand where he set a target of 10m units this year and 20m next, and second, announcing the commitment to building a Gen 10.5 fab in China that will focus on 8K TVs. All of this was done while shaking the US president’s hand and committing to building something in the US, and expanding a meager OLED effort in order to stay in the sights of Apple, who is expected to convert some iPhone products to the technology.
As any good chairman, Mr. Gou is doing his best to appeal to as many factions in the display space as possible, but there comes a time when actual decisions become more important than rhetoric, and it would seem that Foxconn is still unwilling to give specifics, in similar fashion to the new administration in the US. Mr. Gou’s philosophy of “we serve where there is a customer” has served him well given his company’s position as Apple’s primary assembler and his net worth of $7.5b US, but its time to lay out just what you intend to do with this massive display asset base and make a commitment as to the direction of those assets. If it’s going to be focused on TV, than say so, don’t use 8k as a selling point. If its going to be OLED, then make a real commitment, not just enough to give people the impression that you are in the game. If you want to use all the assets for building Sharp/Hon Hai (2317.TT)/Foxconn brands, so be it, but take the shot now. Samsung did it with small panel OLED when no one thought it could work (it did), LG is committed to OLED for TV for the next few years, and everyone assumes that TVs are going to continue to get bigger and cheaper and are building Gen 10+ fabs to compete. Sharp’s mistakes are their mistakes, it’ time to decide, and maybe make a mistake or two, but you can’t please everyone. JOHO
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