Sharp suspends two TV panel plants amid excess inventory

Sharp suspends two TV panel plants amid excess inventory

Tokyo: Sharp Corp expects to keep production suspended at two Japanese liquid crystal display (LCD) panel plants until early May, amid slumping domestic demand for televisions and shortages of a gas used in panel production, the company said on Monday.

For Sharp, whose television sales are focused on the domestic market, the steep fall-off in consumption following the 11 March disaster will be particularly painful in a year that was already expected to bring a slide in TV sales.

Shares of Sharp fell 1.3%, compared with a 0.5% fall in the broader Nikkei index.

“Following the disaster, demand for flat-panel televisions was not as strong as we had anticipated," said Sharp spokeswoman Miyuki Nakayama. “We have a month’s inventory on hand."

Research firm BCN said Japan’s March sales of flat-panel TVs came to two-thirds of the previous year’s figure, after having shown some signs of recovery since government incentives were slashed in December.

Domestic television sales had been expected to slide again after July, when Japan completes a switch to digital terrestrial broadcasting, but BCN analyst Eiji Mori said there could be a boost later in the year as northern Japan starts to recover.

Production was halted earlier this month at Sharp’s Kameyama plant in Mie Prefecture and its state-of-the-art 10th generation Sakai plant in Osaka, which make large LCD panels for TVs.

Analyst Yuji Fujimori of Barclays Capital retained his “underweight" rating on Sharp, but revised down the target price to ¥700 from ¥780 and now estimates the company will post a loss of ¥7 billion ($82.6 million)in the April-June period, compared with his previous estimate of an ¥11 billion profit.

But Fujimori said markets would welcome the decision to return surplus inventories to normal.

Sharp aims to maintain steady production of smaller LCD panels for smartphones and other devices.

“Currently we are seeing more demand for small and midsized panels than for large ones, so we are focusing on using the gases we procure for production in that segment," said Nakayama.

Sharp expects to resume operations at the two large panel plants after the string of Golden Week holidays at the end of April and early May, Nakayama added.

Production at its Taki and Tenri factories in Nara prefecture, which produce smaller LCD panels, will continue.

Sharp declined to specify which gas was running short, but research firm DisplaySearch and Barclays said nitrogen trifluoride (NF3) was used in the production of LCD panels.

One major maker of the gas, Kanto Denka Kogyo, has been unable to manufacture it as normal, due to the effects of the quake and subsequent power shortages.