Panasonic stuck with an earlier decision to go whole hog into plasma display panel manufacturing with a gigantic investment (440 billion yen – about $5.5 billion) for its Amagasaki fab starting in 2005. The bet is now costing Panasonic dearly.
The company said this week it will lose almost $10 billion in the current fiscal year as it writes down goodwill and assets while preparing for further restructuring. Panasonic also skipped its dividend for the first time in more than six decades and cut its full-year TV sales forecast by more than a quarter to 9 million sets. Company shares slumped by nearly one-fifth on Thursday, wiping out $3 billion of its market value.
There is some hope, though.
Kazuhiro Tsuga became Panasonic's president earlier this year and issued a decisive order to stop PDP production immediately. That shocked many in Japan.
Panasonic previously had been spreading its own engineering gospel that PDP technology offered noticably better picture quality than LCD, especially in a dark room. Tsuga conducted his own month-long, side-by-side comparison and found little difference in picture quality. Besides, he noted, "most people watch TV with the lights on.”
In the final analysis, it took Panasonic almost a decade – and billions of wasted yen -- to wake up to the fact that PDP was never going to beat LCD.
Sharp management also bought the myth that the success of its advanced LCD panels manufactured in Kameyama fab was assured. It blindly followed an ambitious expansion plan for ultra large-screen LCD panel production. The result? Sharp announced massive second-quarter losses this week and acknowledged “material doubt” about the company’s survival.
Sharp now finds itself on a pace to double it annual net loss to 450 billion yen ($5.63 billion) after taking a $1.1 billion restructuring charge in the last quarter. Its forecasting operational losses totaling 155 billion yen ($1.94 billion).
A rescue deal with Terry Gou, chairman of Foxconn owner Hon Hai stalled over the summer after a tentative deal was reached earlier in the year. Gou had agreed to pay 67 billion yen for a 9.9 per cent stake in Sharp and partial ownership of an underused display factory near Osaka. Now Gou is pressing Sharp to lower its price to reflect a precipitous decline in its share value.
As a result, Sharp is reportedly exploring “other alliances."
Either way, Sharp is running out of time and options. So, too, is Japan, Inc.
Sharp, dulled by losses, running out of options
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