Sharp to build LCD plant

The flat facts * Sharp plans to build its fifth generation LCD plant in Japan's Mie prefecture. * LG.Philips LCD in South Korea is already operating a fifth-generation plant. * Samsung Electronics, also in South Korea, plans to follow in October with a plant of its own. * In Taiwan, both AU Optronics Corp and Quanta Display hope to have fifth-generation plants operating soon. * The two firms are vying to be the first to do so in Taiwan.

Sharp Corp plans to spend as much as Japanese yen 100 billion (US$809 million) on a new liquid-crystal display plant to stay competitive with South Korean and Taiwanese rivals in the US$22 billion market for flat screens.

The factory, in western Japan's Mie prefecture, will be Sharp's most advanced, equipped with machinery capable of making more television screens from a single sheet of glass than competitors, director Shigeo Nakabu said in an interview.

While Sharp says labor costs in Japan are almost three times those of South Korea's, it wants to build the factory in Japan to avoid technology being siphoned off by rivals. Improving manufacturing efficiency may also be advantageous when LCD prices decline, which some analysts expect to happen by the end of the year.

"Sharp will continue to belong to a group of survivors because it keeps investing in new plants and equipment," said Hiroyuki Yoshida, a senior research analyst at Meiji Dresdner Asset Management Co.

Japan's largest liquid-crystal display maker said the new plant will give it an edge over companies such as South Korea's LG.Philips LCD Co and Samsung Electronics Co, which are operating or planning to operate similar factories.

Sharp's new factory is about double the usual cost of existing LCD plants.

LG.Philips LCD has started producing screens from a plant capable of making as many as 16 laptop screens from a single sheet of glass, more than double the number previously possible. Samsung Electronics will follow in October with a plant of its own.

Taiwanese companies also have similar plans next year.

In Japan, where corporate taxes are higher than those in South Korea and Taiwan, flat-screen manufacturers have limited options to boost their competitiveness, Nakabu said.

"There are only two ways to win," he said. "One is to keep innovating your technology and the other is to revolutionize your manufacturing process."

In Sharp's case, the company will make televisions in the same factory, housing functions typically carried out at different locations under a single roof. Sharp will save on transportation costs and may speed the development of new products by having its TV and LCD engineers work in the same location, Nakabu said.

"This will be a big weapon for us," Nakabu said. "It will be a threat to rivals."

Osaka-based Sharp wants to triple production efficiency at the new plant compared with another large-sized LCD plant in Mie prefecture, Nakabu said.

Sharp, which also makes small screens for mobile phones and hand-held computers, has lagged some rivals in shipping large LCDs commonly used in computer monitors and notebook PCs.

In the large LCD market, Samsung was the global leader in second quarter of 2001 with a 20 percent share, followed by LG.Philips LCD with a 19 percent slice, market researcher DisplaySearch said. Sharp was fifth with a 7.2 percent share.

LCDs accounted for more than 80 percent of all flat-panel sales last year, market researcher DisplaySearch said.

In February, Sharp said it will start the new plant in May 2004 to make LCDs and flat television sets. It plans to invest Japanese yen 28 billion to buy land and build the facility. The company didn't disclose how much would be spent on equipment.

"Our total investment plan is Japanese yen 100 billion for now," Nakabu said. The company plans to invest about 7 billion yen in the year to March 31, 2003, with most of the spending in the year starting April 1, 2004, he said.

Sharp plans to make LCD screens as wide as 40 inches diagonally for televisions, Nakabu said. The new plant is also capable of producing displays for computer monitors, he said.