Sharp Corp, Japan's biggest liquid-crystal display maker, will raise spending on new plants and equipment by about 13 percent to ¥500 billion (US$4.2 billion) over the next three fiscal years to meet demand for parts used in cellular phones and digital cameras.
The extra investment will be used to boost Sharp's production of flat screens and semiconductors in a bid to raise the company's sales at an annual 10 percent over the period, President Katsuhiko Machida told analysts last week.
Cellphone companies such as Vodafone Group Plc, the world's largest mobile-phone operator, are introducing handsets with built- in cameras and picture-messaging capabilities to spur growth.
Sharp expects almost a half of all cellphones this year to have color screens, up from about 10 percent last year.
"A 10 percent growth in sales seems rather aggressive," Nikko Salomon Smith Barney analyst Kiyotaka Teranishi said in a report to clients after the analyst meeting. In November, Teranishi raised his rating on Sharp to "in line" from "underperform."
Risks include a change in Sharp's competitive position in flat screens, problems with starting mass production of its newest small-sized screens, and smaller-than-expected demand for television sets using flat displays, Teranishi wrote in his report.
The company, which was the world's first to introduce a cellphone with a built-in camera, expects group sales of ¥2 trillion for the year ending March 31.
Of the ¥500 billion in capital spending plan, Sharp will invest ¥300 billion at its main liquid-crystal display business, with a third of that being used to raise its production of small-sized panels in the year ending March 2005 at a new plant in Mie Prefecture, Western Japan.
The plant, which is schedule to begin operating in June, will have monthly production capacity of 4 million 2cm panels, which Sharp plans to raise to 18 million panels after about two years.
Production of the new panels, which are to be used in digital cameras and cellphones, began in October at a Sharp plant in Nara Prefecture at a monthly rate of 2.5 million panels.
At its chip business, the company plans to boost production of light-capturing chips known as charge-coupled devices and complementary metal-oxide semiconductors. By October, Sharp wants to be capable of producing 6 million of the chips a month after doubling capacity to 4 million by March.
Sharp will also complete its shift by the end of September to producing a type of memory chip called flash memory with circuit features measuring 0.13 microns wide, which is currently the most advanced in the industry.
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