Japan's Sharp Corp on Tuesday posted an 11 percent rise in quarterly profit as strong sales of liquid crystal displays (LCDs) and mobile phones offset falling chip prices, and it left its full-year outlook unchanged. Sharp's results compared favourably with those from Sony Corp and South Korea's Samsung Electronics, both of which saw their profits drop in the latest quarter on sliding prices of key products such as LCD TVs and handsets.
Sharp has been well positioned to weather tough price competition in LCD televisions thanks to improved efficiency at its cutting-edge factory in Kameyama, in western Japan, which cuts panels from glass plates larger than most of its rivals.
Bigger glass enables Sharp to obtain more panels from a single plate, making it more efficient than competitors using smaller glass. Sony, for its part, procures all of its panels from other companies, allowing it less room to cut costs.
"We have integrated the production process for LCD televisions from key parts through the finished product and that has given us a leg up on the competition when it comes to costs," Sharp Corporate Director Tetsuo Onishi told a news conference.
Sharp, the world's top maker of LCD TVs, said group operating profit totalled 36.46 billion yen in the three months to December 31, against 32.73 billion yen profit in the same quarter of the previous year. Sales rose 12.1 percent to 650.61 billion yen.
The company, which has also enjoyed robust demand for small LCDs for cellphones and other mobile devices such as Sony's PlayStation Portable (PSP) game player, maintained its operating profit estimate of 150 billion yen for the year to March 31, up 23 percent year-on-year.
Sharp stood by its forecast for sales of its LCD TVs to nearly double to 2.7 million units for the full year as consumers continue to trade in bulky cathode ray tube sets for sexier flat-screen models at a rapid pace.
Onishi estimated prices of large LCD panels were falling at an annual rate of about 30 percent, but said that was roughly in line with its plans and had been more than offset by sharply higher volumes in Europe, North America and Japan.
Revenues from LCD panels rose 14 percent in the latest quarter and operating profit in the division jumped 47 percent, although those figures represent a declaration of growth compared with the April-September first half when sales jumped 52 percent and profits surged 60 percent from the previous year.
About two-thirds of Sharp's LCD revenues are generated by small-and-medium sized displays, meaning its earnings are not as vulnerable to sliding prices of PC and TV-use panels compared with companies that concrete on larger LCDs, Onishi said.
"The LCD business posted double-digit sales growth, but the growth rate has declined," said UFJ Tsubasa Securities analyst Kazuya Yamamoto. "Still, considering all the bad numbers coming out of the tech industry right now, the results looked strong and reconfirm Sharp's position as a winner in the sector."
Sharp also reported robust demand for camera-equipped mobile phones and a sharp recovery in profitability in its home appliances division thanks in part to strong sales of a new oven that uses superheated steam to reduce oil and fat in food.
On a negative note, the company was hurt by tumbling prices of flash memory chips, used in digital cameras and mobile phones, and charge coupled devices (CCDs) and CMOS (complimentary metal oxide semiconductors) image sensor chips.
Poor market conditions for flash memory and CCD and CMOS, electronic eye chips in digital cameras and photo-snapping handsets, have been well flagged in earnings reports from Samsung, Japan's Toshiba Corp and several other firms.
Sharp had forecast a 6 percent rise in sales for its integrated circuit (IC) division to 246 billion yen in the current business year, but Onishi said they would likely fall 30 to 40 billion yen short of that target.
For the October-December quarter, operating profit in the IC division dropped 42 percent and sales fell 21 percent.
Prior to the announcement, shares of Sharp ended up 0.63 percent at 1,597 yen, outperforming Tokyo's electric machinery index, which fell 0.01 percent. Sharp is up 8.4 percent in the past three months, compared with the index's 2.9 percent gain.
UFJ Tsubasa's Yamamoto said Sharp's earnings came in-line with expectations and the report was unlikely to have a major impact on the share price.