Sharp Corporation

Company Profile
Publication Date: 5 May 2009

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Sharp Corporation

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TABLE OF CONTENTS

TABLE OF CONTENTS
Company Overview..............................................................................................4 Key Facts...............................................................................................................4 SWOT Analysis.....................................................................................................5

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Sharp Corporation
Company Overview

COMPANY OVERVIEW
Sharp Corporation (Sharp) is a leading player engaged in the manufacturing of electronic components, computer hardware and peripherals. The company primarily operates in Japan. It is headquartered in Osaka, Japan and employs 60,100 people. The company recorded revenues of JPY3,417,736 million ($30,007.7 million) during FY2008, an increase of 9.3% over FY2007.The operating profit of the company was JPY183,692 million ($1,612.8 million) during FY2008, a decrease of 1.5% compared with FY2007. The net profit was JPY101,922 million ($894.9 million) in FY2008, an increase of 0.2% over FY2007.

KEY FACTS
Head Office Sharp Corporation 22 22 Nagaike-cho Abeno-ku Osaka 545 8522 JPN 81 6 6625 3023 81 6 6625 0918 http://www.sharp-world.com

Phone Fax Web Address

Revenue / turnover 3.4 (JPY Mn) Financial Year End Employees Tokyo Stock Exchange Ticker March 60,100 6753

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Sharp Corporation
SWOT Analysis

SWOT ANALYSIS
Sharp is a leading player engaged in the manufacturing of electronic components, computer hardware and peripherals. Sharp has a diversified product portfolio, which enables the company to protect itself against risk of over exposure in any particular line of business, and helps it compete against players in regional markets. In addition, it also enhances the cross-selling opportunities for the company. However, with an increase in the number of products being manufactured in China and Korea, the company faces serious threats in most of its market segments. Strengths Diversified product portfolio Focus on research and development Extensive international presence Opportunities Booming solar cells Market Expanding mobile phone market in Asia Pacific Growing consumer electronics market Weaknesses Rising expenditure affecting margins

Threats Availability of cheaper alternatives Rising environmental concern Vulnerability of the telecommunications industry

Strengths

Diversified product portfolio Sharp has a diversified product portfolio. Its portfolio includes a range of audio-visual and communication equipment, home appliances and information equipment. It has also balanced its consumer-oriented business by tapping into the component market as a manufacturer and supplier of items such as memory devices, displays, lasers and DVD pickups. Diversified product portfolio enables the company to protect itself against the risk of over exposure in any particular line of business, and helps it compete against players in regional markets. In addition, it also enhances the cross-selling opportunities for the company. Focus on research and development The company invests heavily on research and development for launching new products.The company has increased its research spending from JPY189,852 million (approximately $1,666.9 million) in FY2007 to JPY196,186 million (approximately $1,722.5 million) in FY2008. It has 10 groups and 24 divisions in Japan working on various technological domains.

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Sharp Corporation
SWOT Analysis

During 2007, the company has successfully launched innovative products like 108V-inch LCD TV, LCD for mobile equipment such as mobile phones using fusing proprietary, high-resolution liquid-crystal-system technology with high-quality display technology cultivated through the development of AQUOS LCD TVs, with the highest contrast ratio in the industry. It also introduced three high-speed digital multifunctional systems, the MX-M1100, MX-M950, and MX-M860 which offer the fastest output and scanning needed for the high-volume copy market, as well as a wide range of finishing options. Further in 2008, Sharp introduced its new mobile phone (SH8010C) in China. Sharp also developed the VA3C5CZ933, a mobile TV tuner module that supports CMMB (China Multimedia Mobile Broadcasting) and features the industrys smallest package size (9.0 x 9.0 x 1.7 mm). The device is intended for mobile equipment in the Chinese market. The company has competitive advantage because of its strong focus on research and development. Extensive international presence The company has an extensive international presence with a brand recognized on a global scale. Overall, it has approximately 65 international operations, including many manufacturing sites, of varying types in more than 25 countries. It has subsidiaries in North America, the UK, continental Europe, and throughout the Asia Pacific region. This direct involvement benefits Sharp in terms of responsiveness to local market conditions and consumer trends. Additionally, its revenue contribution from international markets has increased from 38.5% in FY2006 to 42.2% in FY2008. Leveraging its strong presence in international markets, the company has been able to reduce its dependence on the domestic Japanese markets.

Weaknesses

Rising expenditure affecting margins The company's selling, general and administrative expenses (SG&A) have been increasing since FY2004.The companys SG&A expense includes advertising, promotion, research and development, salaries and bonuses, and packaging and deliver expenses. Sharps SG&A expenses have increased from JPY422,000 million (approximately $3,705.2 million) in FY2004 to JPY571,337 million (approximately $5,016.3 million) in FY2008. Expenses have increased at a compounded annual growth rate (CAGR) of 8% during FY200408. As a result, in FY2008 operating income amounted to JPY183,692 million (approximately $1,612.8 million), down JPY2,839 million (approximately $25 million) from FY2007, and the operating margin recorded 5.4% compared to 6% in FY2007. Increasing expenses and decreasing margins indicate an unstable cost base, which could adversely affect the company's long term financial planning and investor confidence.

Opportunities

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Sharp Corporation
SWOT Analysis

Booming solar cells market The solar cells and modules market is growing vigorously. It is expected that this market would reach $40,700 million in 2012. Due to a share of 32%, Europe is the largest market for solar cells and modules. Japan is the second largest market, followed by Asia-Pacific. Sharp has a strong production capacity of solar cell. During 2007, it expanded its annual production capacity of thin-film solar cells. The capacity at Katsuragi Plant was increased from 15MW to 160MW. Further in October 2008, the company completed the installation of a new second-generation thin-film solar cell production line at its Katsuragi Plant (Katsuragi City, Nara Prefecture) using large-size glass substrates measuring 1,000 x 1,400 mm, equivalent to 2.7 times the area of conventional substrates (560 x 925 mm). Thus with the increased capacities, the company is poised to take on the increasing demand. The ability to serve the growing demand would enhance the financial and operational results of the company. Expanding mobile phone market in Asia Pacific The Asia Pacific region, including China, India and Japan, is the largest mobile phone market in the world. In volume terms, this region is forecast to reach 331 million units sold per annum by the end of 2010, representing a CAGR of 11.9% during FY20052010. The Chinese and Indian markets are characterized by many first-time buyers of mobile phones. The company along with five other companies NTT DoCoMo, Renesas Technology, Fujitsu, Mitsubishi Electric Corporation and Sony Ericsson Mobile Communications are working on a joint development project in an effort to provide a platform with advanced functionality for 3G mobile phones. This would significantly reduce development time and costs, allowing the manufacturers to invest more time and resources in developing distinctive handset features and expanding their product portfolio. The company would also be able to differentiate its offerings in the Asia Pacific mobile phone market and capitalize on the rise of mobile phone use. Growing consumer electronics market The global consumer electronics market is expected to grow rapidly over the next few years. The global electronic consumer market comprising audio, video and games console products designed primarily for domestic use is expected to reach $233 million by FY2011, which is an increase of 33% over FY2006. The Asia Pacific and the US markets are expected to grow at a CAGR of 7.7% and 6.8% during FY20062011.The growing consumer electronics market is an opportunity for the company to expand its sales and revenue.

Threats

Availability of cheaper alternatives

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Sharp Corporation
SWOT Analysis

With an increase in the number of products being manufactured in China and Korea, the company faces serious threats in most of its market segments. These products, although of poorer quality in most cases, are considerably cheaper due to low manufacturing costs. Even the strong brand equity that Sharp enjoys may not be able to lower the impact of cheaper products being manufactured in China and Korea. Rising environmental concern Concern for cutting CO2 emissions to prevent global warming and reducing the use of environmentally hazardous substances, has become widespread in various countries. As per the directive enacted by European Union (EU) in 2006, restrictions have been imposed on usage of lead, cadmium, mercury, hexavalent chromium, polybrominated biphenyl ether (PBDE) flame retardants in electrical and electronic equipments. Regulations in various countries insist that companies develop and design procedures that reduce the use of raw materials, energy consumption and emissions during manufacture of products. Therefore, the companys business and operations are subject to newer regulations and policies, which would affect its margins. Vulnerability of the telecommunications industry The company's financial performance to some extent also depends on the condition of the telecommunications industry. In the last few years the capital investment by companies in the telecommunications industry have seen drastic cut-backs due to weak economic conditions across the globe, particularly in America, Japan and Europe. Moreover, electronic component prices have been declining annually at an average rate of 10%. The company makes LCD panels for mobile phones using fusing proprietary, high-resolution liquid-crystal-system technology and has also partnered with five other companies on a development project in an effort to provide a platform with advanced functionality for 3G mobile phones. Hence, vulnerability of the telecommunications industry would hamper the revenues of the company.

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