Sharp Unable to Find Tablet-Panel Buyers, Executive Says

Sharp Corp. (6753)’s sales of display panels for tablet computers are less than the company expected, according to a senior executive at the Japanese company trying to negotiate a tie-up with Foxconn Technology Group.

Finding customers for the IGZO panels is Sharp’s biggest focus, the executive told reporters today in Osaka, Japan, where the company is based. Sharp hasn’t found enough orders to boost the operating rate at the plant in Kameyama, central Japan, the executive said.

“We need to get enough orders to keep the factory running,” the executive said in a briefing given on condition that the speaker not be identified. “That is our biggest mission.”

Sharp, a supplier to Apple Inc., has invested at least 350 billion yen ($4.5 billion) in the factory, which was converted from making TV panels and started producing IGZO panels in March. The company, headed for a second straight full-year loss, hopes an alliance with Taiwan’s Foxconn may help it find customers for the displays, the executive said.

“If demand for this technology is lower than expected, it will be difficult for the company to achieve its operating profit target,” said Yuji Fujimori, a Tokyo-based analyst at Barclays Plc. “The company may be forced to lower its earnings estimates when it submits revival plans to banks this month.”

Foxconn Stake

The Sharp executive declined to specify the current operating rate at the plant, known as Kameyama No. 2. There aren’t issues with the production process or yields at the plant, the executive said. Sharp and Foxconn are in talks about collaborating to find buyers for IGZO panels, though no agreement has been reached, the executive said.

Sharp fell 0.5 percent to 207 yen as of 2:26 p.m. in Tokyo trading. The stock has plunged 69 percent this year, making it the biggest percentage loser among more than 1,600 companies in the MSCI World Index. (MXWO)

IGZO panels offer high resolution while consuming less energy than conventional models, according to Sharp. The company had expected an industry transition toward the new technology to happen sooner, the executive said.

Sharp is working on a contingency plan to present to banks as the company faces a deadline for repaying debt, it said Sept. 7. The maker of Aquos TVs is trying to raise cash after widening its loss forecast eightfold last month, and it put up some plants and its headquarters as debt collateral after Standard & Poor’s and Moody’s Investors Service cut its credit ratings to junk.

Bank Loans

Sharp is providing banks with continuous updates on its revival plan, the official said. It has no current plans to revise earnings forecasts, the executive said.

There hasn’t been any significant progress in discussions with Foxconn on their proposed capital tie-up, while the Japanese company still hopes to finalize investment terms by the end of this month, the executive said. Sharp doesn’t have a plan to seek investment from any other company, the official said.

Sharp may consider boosting capital by offering shares after regaining investors’ confidence by reviving earnings, the executive said.

Foxconn, whose Hon Hai Precision Industry Co. (2317) unit makes Apple iPads, agreed with Sharp in March to invest 67 billion yen for a 9.9 percent stake in the TV maker at 550 yen a share. The companies are renegotiating the deal after Sharp widened its full-year net loss forecast to 250 billion yen, causing its shares to plunge as low as 164 yen.

To contact the reporters on this story: Mariko Yasu in Tokyo at myasu@bloomberg.net; Shunichi Ozasa in Tokyo at sozasa@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net

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