SHARP governance and Japan’s electronics sector

SHARP governance is challenged to ensure the group's survival. Innovation Network Corporation of Japan INCJ and Honhai (Foxconn) compete for control

SHARP and Governance

SHARP is a Japanese electronics company with 44,000 employees and YEN 3000 billion (US$ 30 billion) in sales, many factories and a product portfolio ranging from rice cookers, office copiers, solar panels, robots, mobile phones, to supplying APPLE with displays.

SHARP faces repayment of YEN 510 billion (US$ 4.2 billion) in short-term debt to its two main banks in March, and Taiwan’s Honhai Precision Engineering (Foxconn) and the semi-Government Innovation Network Corporation of Japan INCJ are competing for control of SHARP’s rescue.

SHARP’s Board now face decisions directly impacting the survival and the future shape of the company, including the possibility of spinning out different divisions, including electronic components, white goods, displays, electronic components, POS terminals etc.

The big picture issues are:

  1. the urgent need for corporate governance reforms in Japan
  2. the future of Japan’s US$ 600 billion electronics sector.

The need for new business models:

While Japan’s electronics components makers are thriving, Japan’s old conglomerates are languishing. They need energetic active governance, and they need to make a choice between two models:

  1. focus on a small number of key products, or
  2. actively manage a portfolio of businesses.

Innovation Network Corporation of Japan INCJ’s dilemma

Japan has a good record in turning around companies, e.g. Kazuo Inamori’s turnround of JAL, or Haruo Kawahara’s turnround of Kenwood, however, according to its website, INCJ’s mission is “to promote the creation of next generation businesses through open innovation”.

The world’s biggest financial daily, NIKKEI, calls attention to INCJ’s dilemma: is the rescue of an old established conglomerate compatible with INCJ’s mission to create next generation businesses through open innovation?

Private equity funds would be the private sector & free market alternative to INCJ. The move of Atsushi Saito, emeritus CEO of Tokyo Stock Exchange/Japan Exchange Group, to chair the Japan branch of a major private equity fund is an interesting step in this direction.

Read or detailed analysis: “SHARP and the future of Japan’s electronics

SHARP: falling revenues and negative income over 14 years

SHARP’s revenues (sales) peaked in 2008 around YEN 3000 billion (US$ 30 billion), and show a downward trend ever since
SHARP’s revenues (sales) peaked in 2008 around YEN 3000 billion (US$ 30 billion), and show a downward trend ever since
Averaged over the last 14 years, SHARP shows average annual net losses of around YEN 38 billion per year (US$ 380 million per year)
Averaged over the last 14 years, SHARP shows average annual net losses of around YEN 38 billion per year (US$ 380 million per year)

Market report: “Japan electronics industries: mono zukuri

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