Sharp Corp, Japan's largest maker of liquid-crystal displays, expects earnings to improve by the first half of next fiscal year, spurred by steadier prices for some components, Chief Financial Officer Hiroshi Saji said.
Earnings in the six months starting April 1 "will be far better than this year's second half," Saji said in an interview.
Prices of large-sized LCDs, commonly used in computers, wall-mounted TVs and monitors, will stop falling by December, he said.
Sharp said in October earnings will worsen in the next five months as LCD and chip prices continue to tumble. The company expects prices of large LCDs to fall as much as 10 percent in the three months to Dec. 31 before stabilizing. Prices fell as much as 70 percent in the year and a half to Sept. 30 as South Korean and Taiwanese rivals boosted production and supplies.
"I doubt the price declines for large-sized LCDs are over," especially given the cheaper labor costs at Sharp's Korean rivals, said Kazuaki Otsuka, who helps manage about ?4 billion (US$33 million) in Sharp and other equities at ING Mutual Funds Management Co (Japan) Ltd. Sharp's first-half earnings "will be steady compared with the second-half at best." Otsuka said he's unwilling to buy Sharp shares.
Sharp shares have risen 4.5 percent since the start of the year. That compares with a 32 percent drop in the 152-member TOPIX Electric Appliances Index. They rose 3.2 percent to ?1,440 yesterday.
The decline in earnings from components is prompting Sharp to focus more on developing consumer-electronics products such as mobile phones, wall-mounted TVs and Zaurus handheld computers. The company is counting on sales of those devices in markets outside Japan to boost earnings next year.
"Earnings from consumer electronics are rising, while profit at our components businesses will be steady" in the next first half, Saji said. "We'll be alright."
Last month, Sharp said group net income will drop to ?9.7 billion in the second half to March 31, from ?16.3 billion in the first half ended September, with sales declining to ?898.7 billion from ?901.3 billion.
Sharp's large-sized LCD business, which had a loss in the first half, will probably return to profit in the six months to March 31 and will break even for the full year, Saji said.
Prices of small LCDs used in mobile phones and handheld computers will fall as much as 20 percent by March 31 from Sept. 30, while flash-memory chip prices will drop as much as 30 percent, Saji said. Flash memory in mobile phones and consumer electronics retains data even when the power is turned off.
Osaka-based Sharp plans to help its small LCD business remain profitable by making displays that contain more chips than existing screens, saving space and power. It completed sample shipments of so-called continuous-grain-silicon LCDs earlier this month to mobile phone makers, Saji said.
Alliances Osaka-based Sharp is also entering alliances to reduce costs.
After allying with Taiwan's Winbond Electronics Corp last week to jointly develop flash-memory chips for high-speed mobile phones, Sharp may join with more companies to share costs and resources in various fields, Saji said.
"Our stance has been that we enter partial alliances on technology development and entrusted manufacturing," he said. "There will be more in the future."
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