Vertical Divider
Sharp to Reorganize by Splitting Out Display Segment
March 22, 2020
Sharp’s President, Jeng-Wu Tai, said he is considering splitting up the display business; 1) Sharp will maintain an investment ratio of over 50% and secure management rights; 2) the separation is to be completed by the end of FY3/22; 3) JDI’s Hakusan plant (D3), which it is considering acquiring, is included; and 4) companies related to Hon Hai Precision Industry, such as SDP (Sakai G10), SIO (Guangzhou G10.5), Innolux, and Century and others, are not included. The company will put its brand at the center of its business and spin off businesses not related to completed brand products (such as components) and ancillary services into a separate company and shift toward independent management. In the future the company might similarly split off its camera module business.
The display business should post sales of ¥727.3b and OP of ¥24.0b this fiscal year. Around 90% of sales are for small- to medium-sized devices, around 50% of sales are to Apple, and the rest for cars, tablets, and PCs. The company’s technical ability is high for LCD-panel related products such as LTPS and IGZO, and it has many patents. It has had extremely low capex of around ¥23.0b-–¥36.0b per year since FY3/14 (LG Display’s FY19 capex was around ¥700.0b), and depreciation costs are below ¥20.0b, as the company cut back on growth investments due to low free cash flow. It has only one OLED G4.5 factory in Sakai with a production output of 15,000 substrates/month, and lags far behind its South Korean and Chinese competitors. Separating out the display business will allow: 1) the injection of external funds for growth investments; and 2) flexible collaboration with other companies. JDI’s Hakusan factory has a production capacity of 25,000 substrates/month, which rivals the Kameyama 1 factory (22,000 substrates/month), and is one of the newest G6 LTPS LCD plants. It also has a lot of JDI technology and knowhow, such as photo alignment, and it could benefit from the spin-off, although depends on the acquisition value and terms (volume, price guarantees) from major clients (Apple). Other options include the utilization of empty space with JDI and/or other firms to establish OLED lines to start mass production.
March 22, 2020
Sharp’s President, Jeng-Wu Tai, said he is considering splitting up the display business; 1) Sharp will maintain an investment ratio of over 50% and secure management rights; 2) the separation is to be completed by the end of FY3/22; 3) JDI’s Hakusan plant (D3), which it is considering acquiring, is included; and 4) companies related to Hon Hai Precision Industry, such as SDP (Sakai G10), SIO (Guangzhou G10.5), Innolux, and Century and others, are not included. The company will put its brand at the center of its business and spin off businesses not related to completed brand products (such as components) and ancillary services into a separate company and shift toward independent management. In the future the company might similarly split off its camera module business.
The display business should post sales of ¥727.3b and OP of ¥24.0b this fiscal year. Around 90% of sales are for small- to medium-sized devices, around 50% of sales are to Apple, and the rest for cars, tablets, and PCs. The company’s technical ability is high for LCD-panel related products such as LTPS and IGZO, and it has many patents. It has had extremely low capex of around ¥23.0b-–¥36.0b per year since FY3/14 (LG Display’s FY19 capex was around ¥700.0b), and depreciation costs are below ¥20.0b, as the company cut back on growth investments due to low free cash flow. It has only one OLED G4.5 factory in Sakai with a production output of 15,000 substrates/month, and lags far behind its South Korean and Chinese competitors. Separating out the display business will allow: 1) the injection of external funds for growth investments; and 2) flexible collaboration with other companies. JDI’s Hakusan factory has a production capacity of 25,000 substrates/month, which rivals the Kameyama 1 factory (22,000 substrates/month), and is one of the newest G6 LTPS LCD plants. It also has a lot of JDI technology and knowhow, such as photo alignment, and it could benefit from the spin-off, although depends on the acquisition value and terms (volume, price guarantees) from major clients (Apple). Other options include the utilization of empty space with JDI and/or other firms to establish OLED lines to start mass production.
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