As an early entrant in the flat-screen TV race, Sharp shot out to an overwhelming lead, grabbing 86% of the market for liquid-crystal display models in 2000. Six years on, Sharp's (SHCAY) position doesn't look quite so strong. Although it has boosted sales by as much as 13% annually this decade, the overall market has grown much faster, and Sharp's share has plummeted to just 11.8% in units, trailing Royal Philips Electronics (PHG) and Samsung and going neck-and-neck with Sony.
What went wrong? One problem was Sharp failed to nurture its brand. Even as Samsung and Sony (SNE) have laid out billions of dollars to build up and maintain their names in recent years, Sharp held back. Although the company's overall results aren't bad—it's expecting $1.5 billion in operating profits on sales of $25 billion this year—Sharp's strength is largely at home. Last fiscal year, 62% of sales and 89% of profits came from Japan.
Its Aquos TVs aren't high on the wish lists of U.S. or European consumers, and few even think of the company as a TV maker. "Overseas, Sharp's brand remains weak," says Hideto Kitada, vice-president for global brand strategy. "There's no consistent image of what the company does."
IN PLAIN SIGHT.
Today, Sharp is looking to get its LCD sales back on track. On Aug. 31, the company unveiled six new models, with screens ranging from 42 in. to 52 in. To move them off of store shelves, the company this fall is launching its most aggressive global ad blitz ever, with the help of ad agency Wieden & Kennedy, best known for Nike's (NKE) "Just Do It" campaign. Sharp plans to double its marketing budget to $170 million in the fiscal year through March, 2007.
The campaign will include television, print, and Internet ads, as well as kiosks at airports and malls where consumers can see Sharp models up close. In one of its TV spots, a golfer searches for his ball in the rough while viewers sitting at home see it close up in the foreground. "We're definitely behind the competition in getting our overseas strategy sorted out," says its president, Katsuhiko Machida. "We need to show consumers that our TVs measure up."
Sharp's other big problem has been capacity. Last year, as consumers scrapped their old cathode-ray tube TVs for svelte new sets, global LCD TV sales exploded by 140%, to 21.2 million units, from 8.8 million in 2004. But Sharp's factories were already maxed-out and could only make 4 million sets in the year ended in March, 2005—a 47% increase over the previous year.
Worse, Sharp's main panel-making facility in Kameyama, Japan, was ill-suited to making the big-screen models that overseas shoppers coveted. Instead, Sharp opted to make smaller TVs that were a good fit with Japanese living rooms. That won it a following at home, but made it fall further behind abroad.
To avoid a repeat of the shortages, Sharp has rushed new factories into service. The plan had been to finish a $1.4 billion plant in central Japan in October, but in order to boost production in time for the yearend shopping season, Sharp opened the new facility in August.
By yearend, the plant will likely be churning out enough sets to double Sharp's monthly output of big-screen LCD TVs. The company is also converting more lines at its assembly plant in Mexico and plans to open a factory in Poland in early 2007.
PROMISE AND PERIL.
Sharp has plenty of work to do if it hopes to stand out in the crowd of flat-screen makers. Just about every big electronics manufacturer has its sights on big-screen sets. "It's incumbent on all high-end manufacturers to make big-screen TVs, and they'll have to make them high-definition, as well," says Paul O'Donovan, an analyst with researcher Gartner Group.
By 2010, nearly half of all TVs sold in the U.S. will be either LCD or plasma models bigger than 37 in., up from only 16.5% this year, according to researcher DisplaySearch. And for manufacturers, big also means profitable, since low-cost manufacturers in Taiwan and China are muscling their way into the market for sets under 32 in. All the more reason for Sharp to crank up the marketing machine.