MADISON, Wis. – The recent news about Sharp Corp.'s plan for a $2.9 billion joint venture with China's state-owned electric equipment vendor China Electronics Corp. (CEC) raised a few eyebrows in Japan.
The JV plan calls for building a new plant in Nanjing, where advanced mobile displays will be produced starting in 2015.
Sharp will receive an undisclosed amount of licensing fees (estimated to be tens of billions yen), with some of the funds going toward acquiring an 8 percent stake in the JV's plant operator.
The fab will reportedly be able to produce the equivalent of 7.2 million panels for 10-inch tablet computers per month. Sharp will retain the right to purchase up to half of the output. The plan is to initially manufacture Indium gallium zinc oxide (IGZO) panels for tablets and smartphones, adding TV-use panels to the mix later, Nikkei, Japan's economic newspaper, recently reported.
Some Japanese observers expressed discomfiture with the deal because it includes an agreement by Sharp to license its advanced power-saving IGZO screen technology -- regarded by some as the Japanese company's crown jewel.
But let me be blunt: Now is not the time for the Japanese to second-guess a cash-strapped Sharp for transferring its IGZO technology to China. Sharp had no choice; it's a matter of survival.
Further, China's rise in the display market is inevitable. Why delay the technology transfer?
But even that might be missing the point.
Sharp's deal with China's CEC potentially has much bigger ramifications -- in terms of a rapidly changing geographical shift in the world's display production.
The battlefield now involves Korea, Taiwan, Japan, and China. And things have gotten a little more complicated.
Gaining ground are neither the Taiwanese nor the Koreans. It's China.
"China's flat panel manufacturers are expanding capacity at a faster rate compared to Korean and Taiwan suppliers," explained Sewata Dash, senior director of Display Research & Strategy at IHS Electronics & Media, in an interview.
Over the last 12 months, in large LCD panels, China has increased its production share from 6 percent in 2012's first quarter to 11 percent in 2013's first quarter, said the analyst. "Also in recent months, their factory utilization rates (production rates) have been the highest in the industry for large LCD manufacturing."
Changing geographical shift in the world’s display production
Source:IHS Report, LCD Supply and Demand Market Tracker
Now, let's turn our discussion to IGZO panels.
Here's the reality: When Apple, as well as practically every mobile and table manufacturer, starts clamoring for IGZO panels (as predicted by many in the industry), the world might not have enough IGZO panels to go around.
The potential product shortage will hurt Sharp more than anyone else (remember, Sharp is still heavily dependent on LCD to get out of the hole), since it will only give more power and opportunity to its competitors.
China joining the IGZO fray will affect the business of Taiwanese and Korean manufacturers in the next few years, if not immediately.