Chimei Innolux
Strength of yen drives company to drop its 'made in Japan' strategy in favour of cost savings

Sharp, one of the world's largest manufacturers of LCD panels for TVs, has announced it's forming an alliance with Taiwanese company Chimei Innolux, in an effort to stave off the effects of the strength of the Japanese yen on its pricing and profitability.

That ends a policy of keeping production in Japan, which Sharp saw as vital to protect its key technologies: under the agreement, the company will supply Chimei Innolux with the know-how to reduce power consumption, and will then outsource the manufacture of sub-40in screens to the Taiwanese operation.

Sharp will also supply larger panels to Chimei, which also expects to gain 3D technology as part of the deal. It's hoped that the two will begin supplying panels to each other before the end of this year.

Chimei Innolux is affiliated to Hon Hai Precision Industry, also known as Foxconn, which is the world's largest electronics manufacturing combine.

It's currently the world's third-largest manufacturer of LCD panels for TVs, with Sharp in fifth position, and together the two will still occupy third position, but their combined market share will be 22.8%, close behind global No. 2 LG Display.

More after the break

Sharp has found itself wrongfooted by the rapid and sustained rise in the value of the yen against world currencies, which has seen it cutting production at its major plants, including its most recent opening in Osaka prefecture, Japan.

When the ground was broken for that plant back in July 2007 the yen stood at just under Y120 to the US dollar; today it's trading at just over Y82/£, a change in value of almost 40%.

As a result, it's forecast that profits for Sharp's LCD panel business may be down almost 80% on those achieved three years ago, despite production cuts of up to 30% at the Osaka plant, and 10-20% across the company as a whole, during 2010.

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