Apple display supplier Sharp posts $1.9 billion annual loss, avoids collapse
One of Apple's key display suppliers, Sharp, posted an annual net loss of $1.9 billion on Thursday and cast doubt on its ability to keep operating, although it will continue to live on in the short-term thanks to investments by banks.
Sharp blamed the loss on competition from cheaper Chinese smartphone LCD panels, as well as past restructuring charges, according to the Financial Times. The company has in fact announced a new set of restructuring efforts, including laying off 10 percent of its workers, among them 3,500 people in Japan. It will also be selling off its head office in western Japan.
Mizuho and Bank of Tokyo-Mitsubishi UFJ have agreed to give Sharp 200 billion yen (approximately $1.7 billion) in a debt-for-equity swap, and the company will get an additional 25 billion yen ($209.9 million) from a fund backed by the banks. In its next fiscal year, the company is hoping to post an operating profit of 80 billion yen ($671.8 million). It could return to a net profit in fiscal 2017.
While Apple also sources displays from LG and Samsung, Sharp is a major partner, and is credited with being the first company to build LCD panels using IGZO (indium gallium zinc oxide) technology back in 2012. Apple may be preparing to switch to IGZO for its upcoming 12.9-inch iPad, though panels would allegedly be produced by LG and Samsung as well.
IGZO could potentially improve the response, thinness, and power consumption of Apple displays. At the moment the company relies on LTPS (low-temperature polycrystaline silicon) panels for iPhones and iPads.
Sharp blamed the loss on competition from cheaper Chinese smartphone LCD panels, as well as past restructuring charges, according to the Financial Times. The company has in fact announced a new set of restructuring efforts, including laying off 10 percent of its workers, among them 3,500 people in Japan. It will also be selling off its head office in western Japan.
Mizuho and Bank of Tokyo-Mitsubishi UFJ have agreed to give Sharp 200 billion yen (approximately $1.7 billion) in a debt-for-equity swap, and the company will get an additional 25 billion yen ($209.9 million) from a fund backed by the banks. In its next fiscal year, the company is hoping to post an operating profit of 80 billion yen ($671.8 million). It could return to a net profit in fiscal 2017.
While Apple also sources displays from LG and Samsung, Sharp is a major partner, and is credited with being the first company to build LCD panels using IGZO (indium gallium zinc oxide) technology back in 2012. Apple may be preparing to switch to IGZO for its upcoming 12.9-inch iPad, though panels would allegedly be produced by LG and Samsung as well.
IGZO could potentially improve the response, thinness, and power consumption of Apple displays. At the moment the company relies on LTPS (low-temperature polycrystaline silicon) panels for iPhones and iPads.
Comments
The display manufacturing market has collapsed because everyone raced to the bottom along with brutal competition and commoditization.
This was first evident in televisions. No one was making money on televisions. Even Samsung got out of that business by divesting that part of its business.
Now it is hitting the small display business. Sharp's displays are too expensive for the market. They have to lower their prices to match the less expensive competition which makes identical displays. Otherwise they die. That is the nature of business.
I'd doubt that too. I may be remembering incorrectly but didn't Apple prop them up somehow a few years back? Or was that just by advancing payment on a large order? Whatever, I would think ( actually 'firmly believe' would be more accurate to say) Tim is well aware of all his suppliers' financial situations and will have long had all the contingencies in place.
We're still missing IGZO Cinema Displays and retina MacBook Airs, if they continue that line. And Apple TV panels, of course, to keep Gene Munster from losing it, though it may be Foxconn that comes up with some or all of that production.
Just trying to look at the bright side here. Sharp has something valuable enough to attract this interim financing.
When your product becomes a commodity, then you risk losing your business to those who can undercut your price.
That is what happened with Sharp.
This is what is happening with Android Phones. This is why Samsung is hurting severely in the smartphone market.
Obviously, Apple doesn't make commodity items. It never has. And it never will.
Sharp didn't just make displays though. They have been around a long time making many and wide ranging products. So I can't think it is just the monitor division dragging them down. It is the same for so many of these similar companies. I have to wonder if more nimble and newer companies are eating their lunch too.
Hopefully, as with Sony this is a company I would hate to see go belly up (unlike some I could mention).
IPads use IGZO, not LTPS, according to witty, ticcy Ray Soneira anyway.
But they purchased GTAT... Oh wait. Never mind.
Panasonic was in the same situation. Sharp probably needs to follow their reorganizational strategy. It is great that Japanese companies try to avoid layoffs, but eventually you need to cut unprofitable business or everyone will lose their jobs. Like Panasonic, they probably need deeper cuts then the 10% layoffs coupled with significant additional investment in areas that will generate more profit.
Agreed.
such contrast how component companies like sharp can barely eek by while the product designers like apple are killing it. hope sharp can turn things around.
This is why Steve Jobs pulled Apple out of manufacturing and began outsourcing. As businesses begin to consolidate and certain volumes of production can be obtained, the cost also goes down. Smaller firms that can't meet those volumes, and in turn costs, are pushed out of the market. This is what was happening to Apple in the mid-90's when they were still building their own computers.
Although I'm not really sure what you mean by component companies and product design companies. Sharp is both, and so is Apple, by the way. The difference is that Sharp's components are manufactured for the market, and Apple's are specifically made for Apple's own devices. Yes, Apple does not build their own components - it's still much cheaper to outsource - but they usually are custom parts engineered and built to Apple's specifications.
This is a classic case of how Japanese economy works: Big Japanese banks took over large failing companies and refused to let it die. U.S. banks do not like to own failing companies and will just cut their losses and force the companies to liquidate assets.
Let Foxconn buy and run it.
Hopefully, as with Sony this is a company I would hate to see go belly up (unlike some I could mention).
Agreed. I do love my 70" Quattron TV.. Thing is gorgeous and has darker contrast than most Samsung TVs.
In the 1990s, I had a friend who hated what Boeing was doing to her parts-procurment job. She was having to call suppliers who sold to almost no one but Boeing and tell them that what Boeing would be paying them for parts was being radically cut.
My own suspicions is that that penny pinching is one reason why Boeing had so many problems with the 787. Meanness like that tends to come back and bite you.
Yes, I'm sure you're very concerned about Apple. ????