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August 21, 2017

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Under the umbrella of Taiwan's Hon Hai, Sharp is on track for recovery

OSAKA — With the help of Hon Hai's cost-cutting know-how, Sharp is on track to a recovery. In fiscal 2016, Sharp registered its first annual group operating profit in three years. However, Sharp is still a long way from a complete rebound, as sales have not recovered since its withdrawal from some unprofitable business sectors.

In June, leaders of four U.S. state governments, including Michigan and Wisconsin, visited Sharp headquarters in Sakai, Osaka Prefecture, to attract investment, after hearing that the beleaguered electronics maker was considering building its first liquid crystal panel factory in the United States.

A senior Sharp official said, "The possibility of building a factory for small- and medium-sized liquid crystal displays is high if conditions are met." Sharp hopes to sell in-vehicle panels to major automakers.

Such activities would have been unthinkable in the past few years, when the struggling firm experienced repeated business shrinkages and withdrawals. With the help of financial backing from Hon Hai group, also known as Foxconn Technology Group, Sharp has started to change direction and expand its foreign operations once again.

In September, Sharp plans to exhibit its products for the first time in five years at an international trade show for consumer electronics and home appliances being held in Berlin. The trade show is seen as a stage to showcase Sharp's reentry to the European market of television sets, following its withdrawal in 2015.

In the North America market, Sharp is considering reentry under a new brand name, as it relinquished its Aquos liquid crystal television brand in the region.

'Son of a rich family'

The driving force behind Sharp's recovery is a thorough cost-cutting drive under the direction of its President Tai Jeng-wu, who was sent from Hon Hai. Tai introduced a new system of requiring approval from the president for company expenses of 3 million yen (US$27,000) or more. This is a drastic change from the previous system of requiring approval for expenses of 500 million yen (US$4.6 million) or more. In other words, Tai has been checking almost all the company's contracts.

There have also been changes in parts procurement practices. A source close to the company said a Sharp employee requested a price reduction from a parts manufacturer after showing a comparison between Hon Hai's previous transactions with other companies and the manufacturer's transactions with Sharp.

Before assuming the current post, Tai bitterly criticized Sharp's lack of cost consciousness. He described Sharp as being like "a son in a rich family." However, Tai has recently given the company a passing grade, saying, "There has been a great improvement."

In fiscal 2016, there was a reduction of more than 70 billion yen from a year earlier in expenditures including the cost of transportation and advertisement.

Direct support from Hon Hai has also been considered effective. Sharp released a cordless vacuum cleaner in December 2016, the first home appliance product jointly developed with Hon Hai. The vacuum, which had parts procured at reduced prices through Hon Hai's supply network, has had sales above the initial target of 8,000 units per month. Sharp plans to release a new model of the vacuum in September.

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