Sharp, Under Foxconn, Aims to Excel in Phone Displays
April 03 2016 - 9:10PM
Dow Jones News
SAKAI, Japan—Success for Sharp Corp., newly under the control of
Taiwan's Foxconn Technology Group, may boil down in large part to
whether it can stay ahead in the fast-changing technology for
smartphone displays.
Foxconn chief Terry Gou formally signed the $3.5 billion deal to
take a controlling stake in Sharp on Saturday, in a long-delayed
conclusion to talks that had left the struggling Japanese
electronics maker in limbo for months.
Sharp is known to the public for brand-name consumer goods such
as washing machines and televisions, and Mr. Gou said he wanted to
expand that business. But the crown jewel at Sharp has been its
display business, which supplies screens for smartphones and other
devices to the likes of Apple Inc.
"I am committed to make speedy investments in Sharp to help
develop the next-generation display technology," Mr. Gou said after
the signing ceremony at a display factory near Osaka.
Getting access to ever-sharper, thinner and more
energy-efficient screens is critical for smartphone makers. Current
models use liquid-crystal displays, but screen suppliers are
gearing up for a possible transition to organic light-emitting
diode, or OLED, screens, which allows makers to shape phones into
flexible designs such as the curved screens on some Samsung
Electronics Co. Galaxy phones.
People in the industry say they expect Apple to start using OLED
screens for its iPhones as soon as next year. An Apple spokeswoman
declined to comment.
Sharp's problem: It is far behind rivals in commercializing the
OLED technology. Samsung currently makes more than 95% of the
global supply, according to Beijing-based research firm Sigma
Intell. LG Display Co. of South Korea also makes the displays, and
Sharp's main rival at home, Japan Display Inc., hopes to start
mass-producing the newer panels in 2018.
Foxconn, known formally as Hon Hai Precision Industry Co., says
it plans to direct ¥ 200 billion ($1.8 billion) of the cash it is
committing for the Sharp deal toward developing OLED screens with
the goal of providing them by 2019. The Taiwanese company, the
leading assembler of iPhones, has long considered a move to making
displays as it seeks to diversify further from contract
manufacturing.
Analysts call the 2019 target challenging, given Sharp's late
start. Former Sharp display engineers say more than half the
company's OLED team has left amid job cuts and management turmoil,
leaving just a handful of engineers and a small research
facility.
Even if everything goes well, "a realistic timeline for
Foxconn-Sharp to start supplying OLED displays would be 2020, said
Yasuo Nakane, an analyst at Mizuho Securities.
Sharp's chairman, Shigeaki Mizushima, long pooh-poohed the OLED
technology in favor of an improved version of traditional
liquid-crystal displays. A technology in which Sharp specializes
called IGZO, or indium gallium zinc oxide, enables it to make
high-definition displays that consume less energy. Apple's iPad Pro
uses a panel with the technology, people familiar with the
production said.
Mr. Gou said he would also work to maximize the use of IGZO,
saying it was superior to OLED in some cases. "I know a lot of
people are interested in our OLED strategy. But don't forget IGZO
as well," he said.
Even if Sharp-Foxconn is late to the game in OLED displays, one
advantage is Apple's desire to have multiple suppliers for key
components. Apple is particularly reluctant to lean too heavily on
Samsung because the South Korean company might prioritize supplying
cutting-edge displays to the Galaxy, its flagship handset that is a
fierce competitor to the iPhone.
OLED displays are illuminated through individual pixels rather
than through a backlight, which means fewer layers and a thinner
screen. The lack of a backlight means they are potentially more
energy-efficient, as black pixels are turned off, unlike in LCD
displays.
Analysts say it is too soon to call a winner because OLED
screens still have some drawbacks such as a fuzzier display in some
cases, higher cost and questions about durability. "OLED wouldn't
be the best solution for all the display needs," said Hiroshi
Hayase, a senior analyst at IHS.
OLED screens are topped with a layer of organic compounds
instead of the liquid crystal layer for LCDs. Sharp can springboard
off its existing production technology because the first part of
the process is similar, said Alberto Moel, a technology analyst for
Bernstein Research.
Meanwhile, Mr. Gou is hedging his bets, saying he wants Sharp to
keep selling to consumers, not just other companies like Apple.
"My policy is clear. I will provide my full-fledged support for
Sharp to become a respected, cutting-edge consumer electronics
brand world-wide," he said.
Write to Takashi Mochizuki at takashi.mochizuki@wsj.com and Eva
Dou at eva.dou@wsj.com
(END) Dow Jones Newswires
April 03, 2016 20:55 ET (00:55 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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