Under the terms of the deal, Fujitsu will sell the liquid crystal display (LCD) business, including R&D, manufacturing and sales operations, to Sharp for an undisclosed amount. The deal will mark its effective exit from the volatile display market.
Fujitsu Display Technologies had been primarily focused on producing LCD panels for use in PC monitors, and Sharp will gain approximately 450 personnel and the related intellectual property rights held by Fujitsu. The deal is expected to be completed in March.
Osaka, Japan-based Sharp is the largest maker of liquid crystal displays in Japan, and is also one of the world’s largest makers of television LCD panels. It is thought that the main value of the deal for Sharp is not the actual production lines, which are said to be fairly old. Instead, it is Fujitsu’s patents and its engineers. Sharp hopes the move will therefore strengthen its development and production of displays for mobile phones, game consoles and other mobile devices.
At the moment, Japanese LCD makers are being squeezed from tough competition from South Korea, in the form of Samsung Electronics Co Ltd and LG Philips LCD Co Ltd, and Taiwan in the form of AU Optronics Corp and Chi Mei Optoelectronics Corp. This is forcing the Japanese outfits to consolidate their operations.
Earlier in the day, it was revealed that Matsushita Electric Industrial Co Ltd and Hitachi Ltd would form a partnership in plasma panels, another type of display used in flat screen TVs. Last week, Fujitsu said it would sell an additional stake in a plasma panel joint venture to its partner Hitachi Ltd.
The problems facing the LCD sector are effectively of its own making. All of the top LCD makers have invested heavily in seventh generation factories on the back of predictions of a surge in demand for flat screens. However, this demand has been slow to materialize, and the industry is facing a serious oversupply problem.
At the moment, there is a glut of unsold units sitting in warehouses across the world, as consumers have been very slow to replace bulkier CRT TVs with the slimmer but more expensive LCD panels that can be hung on walls.
That said, demand for LCDs and plasma televisions has been slowly improving of late, and global sales may reach $35.7bn in 2005, from an estimated $21.4bn in 2004, according to market researcher ISuppli.
Meanwhile, prices for LCD displays are thought to fallen by almost 20% in the final three months of last year, and a further 10%-20% fall is predicted during the first half of 2005. This has put further pressure on the operating margins of manufactures, and Fujitsu’s decision to sell its unit allows it to exit a business where profit is declining.
Fujitsu Display Technologies had sales of about JPY 60bn ($574m) in the fiscal year ended March 2004.
