Here’s Why Sharp Just Forecast Its First Profit in Three Years
Japan’s Sharp on Tuesday forecast its first annual operating profit in three years after it cut jobs and withdrew from its loss-making television business in North America.
The liquid crystal display (LCD) maker, now owned by Taiwan’s Foxconn, expects an operating profit of 25.7 billion yen ($245 million) for the year to end-March, recovering from a 162 billion yen loss the previous year.
That, however, was below a 40 billion yen profit reported by the Nikkei business daily last month.
Foxconn, formally known as Hon Hai Precision Industry, bought two-thirds of Sharp (SHCAY) for around $3.7 billion in August. Sharp cut about 6,000 jobs, or about 12% of its workforce in the previous business year.
Over the coming months, Sharp may benefit as a industry-wide supply glut of panels eases following production cutbacks, but it must still compete with Chinese peers that are rapidly expanding capacity, and South Korean rivals that lead in next-generation organic light-emitting diode (OLED) screens.
For future versions of its iPhone, Apple (AAPL) is widely expected to adopt OLED screens, which are generally thinner and are more flexible than LCD panels.
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In September Sharp announced plans to spend $570 million to build OLED production lines that will begin fabricating screens from around April 2018.
South Korea‘s LG Display is investing 10 trillion won ($8.8 billion) in OLED production, while Samsung Display, an unlisted unit of Samsung Electronics (SSNLF) is spending 4 trillion won.
For the second quarter, Sharp posted an operating profit of 2.5 billion yen compared with a 3.5 billion profit a year earlier.