Sharp Corp's president said it would be tough for the Japanese electronics company to meet its annual profit forecast as pressure to cut liquid crystal display (LCD) panel prices counters the benefits of a cheaper yen.
"To be honest, it is very tough," President Kozo Takahashi told reporters in Tokyo on January 07, when asked if Sharp would be able to meet its profit forecast for the year ending in March.
The major supplier of smartphone panels has forecast an operating profit of 100 billion yen ($840.3 million) for the current financial year. It had expected the dollar to average 106 yen during the second half versus around 120 yen where the greenback is trading now.
Takahashi said prices of devices such as LCD panels have been under pressure due to calls from clients for lower prices. "So, we cannot enjoy a boost from a cheaper yen," he said.
Traditionally, exporters like electronics firms and auto makers are among the biggest beneficiaries of a cheaper yen, which boosts their price competitiveness against foreign rivals and buoys overseas earnings when they are converted back to the home currency.
Until recently, Sharp said the impact of the yen's fall on its overall earnings had been neutral because its LCD panels were made domestically and exported while home appliances were made overseas and imported into Japan. That cancels out the company's currency gains and losses.
Many Japanese manufacturers previously shifted the bulk of their production overseas to counter years of yen strength, before Prime Minister Shinzo Abe took office in late 2012 and introduced polices that led to a weaker yen.
To take advantage of the yen's fall, Sharp is shifting production of some appliances back home. The company said it will increase domestic production of LCD TVs and refrigerators. It has already started test production in Japan in late December of air purifiers, which is being made in Shanghai.