Sharp Bets Big on Ultra-thin, LCD TVs

The Japanese company's ability to sell ever-thinner liquid-crystal-display sets will determine whether it can retain brand cachet and keep profits up

by Kenji Hall

Shigeaki Mizushima is about as wily an engineer as you'll find at Sharp (SHCAY). He once tailed the company's top executive into the bathroom to plead for more funds for a project. As a young researcher, Mizushima set up a technology demo for a liquid-crystal-display prototype on the rooftop of a building and then got his boss to drag the chief executive officer outside for a look after a senior management meeting had ended one floor below. "He asked to see it again indoors," recalls Mizushima. "Then he gave us the green light."

Now, as the head of display technology research for Sharp, Mizushima, 52, is putting his natural flair for theatrics to a different use: persuading consumers that ultra-thin, liquid-crystal-display TVs are the best flat-screen sets around. In late August, he and Sharp President Mikio Katayama unveiled a super-svelte 52-inch LCD TV prototype that the company plans to make at a new $3 billion plant near Osaka starting in March, 2010. They have hit the road with the next-generation LCD sets, and will be stopping next at the Jan. 7 International Consumer Electronics show in Las Vegas after industry confabs in Berlin and Tokyo in recent months.

Mizushima's ability to sell the public on thinner LCDs could determine whether Sharp can keep its brand cachet and profit margins high. Success will also help insulate the company from the 20% to 30% declines in TV prices annually. "Thinner LCDs will give consumers more freedom to put a TV anywhere—on a wall, for instance—and change their lifestyles," he says. He won't divulge details about the panels except to say that they'll be made from materials and with methods never tried before.

Targeting Buyers Willing to Spend Thousands

Some analysts have their doubts. "Consumers are already enamored with the flat TVs out there," says Paul Gagnon, DisplaySearch's director of North American TV research. "Going from a set that's three or six inches thick to one inch isn't a big enough difference."

LCDs are the planet's dominant thin-TV technology and the market's fastest-growing sector. This year, four out of five consumers worldwide who buy a flat-panel TV will choose an LCD set, according to market researcher Displaybank's forecast. That adds up to big bucks when you consider that manufacturers are likely to sell 88 million flat TVs in 2007. DisplaySearch estimates that LCD TV sales alone could exceed $65 billion this year. By 2015, unit sales of flat TVs are likely to have tripled, to 264 million, with much of the gains powered by annual double-digit growth rates for LCDs.

To recoup the massive spending on its next-gen TVs, Sharp will need to target buyers who are willing to cough up thousands of dollars for the latest high-def set. In the cutthroat, $101 billion TV business, giant-screen, high-end sets yield the fattest profits. Mizushima says Sharp will be able to make the new LCDs in any size. But he'll likely avoid the low-margin, high-volume market for smaller sets, at least initially.

Big Crowd at Next-Gen TV Party

Sharp has thrived despite the intensifying competition from other top brands as well as from low-cost rivals such as Vizio and Westinghouse. This fiscal year through March, 2008, the company forecasts a 3.2% gain in net profits, to $955 million, on an 8.7% rise in sales, to $31 billion. In the third quarter, its Aquos TVs even snatched the No. 1 spot in North America, according to DisplaySearch.

The problem is, the high-end market is attracting a crowd. Many manufacturers are planning their own next-generation technologies to challenge the two most popular flat-panel types: LCDs and plasma displays.