Sharp Corporation has temporarily suspended production of LCD panels at two of its Japanese plants after the earthquake there led to lower demand and subsequent overstock.
The company is halting production at the Sakai plant in Osaka and the Kameyama plant in the Mie Prefecture until at least early May, citing a lack of demand for its TVs and shortages in a gas, believed to be nitrogen trifluoride, used in the production of the LCD panels, reports Reuters.
Sharp has a month's inventory in excess. We queried if it was going to sell this off at sale prices, but the firm was reluctant to spill the beans. Clearly the situation has already had an adverse affect on its profits, so it may attempt to maximise its income from the stock it already has.
Before the earthquake, Sharp's CEO, Mikio Katayama, predicted that the company would outdo its own forecasted sales for the year ending in March, which was set to come in at 15 million units. This is clearly not going to happen, especially with surplus inventory.
"Sharp has indeed started reducing production of LCDs for TVs at two sites, in Sakai and Kameyama, and demand has certainly been affected by the earthquake," Jasper Credland, a spokesperson for Sharp UK, told thinq_. "The potential length and scope of the scale-down in production are closely connected to a number of unpredictable factors, all of which my colleagues in Japan are studying carefully. Hopefully, we will have more clarity soon. ”
The natural disaster in Japan caused major disruption to many technology companies, particularly considering Japan's dominant position as an exporter of technological components.
Sharp is not the only company which was forced to close plants or suspend production. Freescale had to close a damaged fab, while Hitachi and Toshiba were also affected. A quarter of the world's silicon wafer supply has been halted. A lot of confusion and uncertainty still resounds over exactly how badly the industry will be affected in the long term.
As of market close today Sharp's stock was down six yen to 771 yen, a fall of 0.77 per cent. This is a minimal impact from the announcement of the suspended production, but the market may be calmed by the fact that the problem of excess stock is being addressed.