Sharp plans to sell its LCD panel factory, who is the buyer?

According to a report by Nikkei yesterday (5/12), Sharp plans to sell its second Kameyama factory in Japan, which produces small and medium-sized LCD panels, to parent company Hon Hai. This is Sharp’s second sale of an LCD panel factory in the past year, following the first factory of Sakai’s 10th generation line and Mie Works. If the news is confirmed, the adjustment of Sharp’s LCD panel business will once again attract widespread attention.

Nearby in the picture is the second factory of Sharp's Kameyama factory (Photo source: Kyodo News)

Sharp is determined to reduce its LCD panel business and transform to seek rapid development

In recent years, the LCD panel industry has been undergoing innovation, and the new industrial pattern is being reshaped. In terms of market structure, mainland China panel companies such as BOE, TCL CSOT, and Huike continue to expand in this field, and their overall production capacity, output, and market share continue to increase. However, the overall profitability of the LCD panel market is also showing a downward trend due to increased supply. In terms of technological innovation, the strong rise of new display technologies such as OLED and Mini/Micro LED has become a strategic development direction for panel manufacturers to change lanes and overtake others to form differentiated competitive advantages.

Against this background, Japanese and Korean LCD panel manufacturers such as Samsung, LG, Panasonic, JDI and Sharp have successively announced their withdrawal from the market and stepped up their transformation to OLED, Mini/Micro LED or other technology tracks to locate in high-growth, high-margin emerging markets in order to get rid of the predicament of long-term losses in the LCD panel business and enhance competitiveness and profitability.

Among them, Sharp will have a cumulative loss of 410 billion yen from 2022 to 2023. In order to revive operations, Sharp has accelerated the pace of adjusting its LCD panel business since last year. It has successively sold the Sakai 10th generation line factory and the first factory of the Mie Works, demonstrating its determination to transform from asset-heavy LCD panel production to asset-light, and focusing resources on small and medium-sized panels such as automotive/VR, semiconductor back-end processes, and even high value-added areas such as AI. It said that in the future, it will target "strong brand enterprise SHARP" and promote a transformation route with brand business as the core.

The specific timeline and content related to the sale of assets are as follows:

On May 14, 2024, Sharp officially announced that its Sakai 10th-generation line factory in Japan will cease production in the third quarter of 2024. The factory mainly produces 42-inch, 60-inch and 70-inch LCD TV panels and has completely ceased production in 2024. According to TrendForce’s analysis, the closure of the Sakai Gen 10 production line will affect the TV panel supply market in 2025. It is estimated that the overall LCD TV panel supply will decrease by nearly 5 million units next year, accounting for 2% of the overall LCD TV panel supply.

On December 9, 2024, Sharp announced an agreement with KDDI, a Japanese telecommunications company, to sell part of the land, buildings and power supply equipment at the original site of the Sakai factory to KDDI, striving to fully launch the AI ​​data center transformed from the Sakai factory in 2025, which is expected to be opened in 2026.

On March 15, 2025, Sharp signed an agreement with SoftBank Group. SoftBank spent approximately 100 billion yen to acquire Sharp's Sakai factory and part of its land, planning to transform it into a large data center to commercialize the AI ​​intelligence developed in cooperation with OpenAI.

March 31, 2025: Sharp announced that it has signed a contract with Japanese electronic components manufacturer Aoi Electronics to sell the first factory of the Mie Works (Mie Factory) in Mie Prefecture to Aoi. The factory previously mainly produced small and medium-sized LCD panels for smartphones and has been discontinued for nearly 10 years. Aoi plans to introduce a semiconductor back-end process (packaging) production line in the factory, aiming to put it into production in 2027. Sharp will assist Aoi to establish a semiconductor back-end process production line at the Sanchong Works through Sharp Display Technology, a subsidiary that specializes in small and medium-sized panel business. If Aoi develops smoothly in the future, Sharp will also consider selling the second factory of the Mie Works to Aoi.

May 12, 2025: Nikkei News and other reports stated that Sharp plans to sell the Kameyama Second Factory to its parent company Hon Hai. It is reported that the Guishan factory currently mainly produces small and medium-sized LCD panels for smartphones, tablets, PCs, etc., and consists of two factories (Guishan No. 1 factory and Guishan No. 2 factory). It is the second factory that is planned to be sold to Hon Hai this time. Compared with the first factory, the Guishan No. 2 factory has a lower utilization rate. Sharp has reduced its production capacity to about 80% of the original level in June 2024. It hopes to reverse the loss situation of the panel business and improve profits by selling factories with low utilization rates.

The results of adjusting the LCD panel business have also begun to show. In 2024, Sharp handed over its first profitable report card in three years. According to reports, Sharp sold the LCD panel factory land and buildings, successfully filling the special loss gap caused by light assets, driving Display to achieve a consolidated net profit of 36 billion yen (a loss of 149.9 billion yen in 2023), which means Sharp has turned a profit for the first time in three years, and performed better than the company expected.

The panel industry continues to consolidate, and the supply and demand pattern is improving

After the suspension of Sharp's Gen 10 line and the sale of LGD's Guangzhou factory, there is still the possibility of consolidation in the panel industry. TrendForce pointed out that under the current situation, there are still some high-generation panel production lines with potential M&A value, such as Xianyang Caihong Optoelectronics' 8.6-generation line and Sharp's Guangzhou 10.5-generation line.

Taking a recent case as a reference, LG Display’s Guangzhou factory (initial investment of US$4 billion/approximately 28 billion yuan) was eventually acquired by TCL CSOT for 10.8 billion yuan. The initial investment scales of Xianyang Caihong Optoelectronics' 8.6-generation line and Sharp's Guangzhou 10.5-generation line are 28 billion yuan and 61 billion yuan respectively. If we refer to the transaction consideration ratio (the acquisition price is approximately 38.6% of the initial investment), and considering that Sharp's 10.5-generation line has higher generation technology and a larger investment base, its potential acquisition valuation may increase. The future of these two major production lines will attract much attention from the industry.

It is now clear that the consolidation of the panel industry is a general trend and will have a certain positive impact on the development of the overall industry. On the one hand, industry consolidation has led to an increase in industry concentration, which will help panel manufacturers improve their bargaining power with brand customers. On the other hand, after the continued integration of resources, panel manufacturers can simultaneously optimize product portfolios and improve coordination in regulating production line utilization rates.

In general, with the elimination of low-end backward production capacity, the concentration of the panel industry continues to increase, the industry structure has been reshaped, and it is gradually developing in a stable and orderly direction.

From the demand side, there is an obvious trend towards larger panel sizes, which is conducive to accelerating inventory removal and industry demand returning to a normal pace. At the same time, new technologies and new applications are driving new demand. In the future, panel demand and panel factory shipments can be expected to grow.

From the supply side, it is a consensus to produce on demand and dynamically control production. Even under the influence of external environment fluctuations, panel manufacturers will dynamically adjust their utilization rates to maintain overall stability. Judging from the market situation in the second quarter of this year, the demand for large-size panels has shown a downward trend, and some panel manufacturers have stated that they will respond by controlling production.

In this regard, TCL Huaxing stated in a recent media group interview that demand fluctuations in the second quarter are phased. In the medium and long term, the market is stable and improving, quantity demand remains stable, the trend of large-size will continue, and market prices will remain at a reasonable and healthy level. In response to the callback in procurement demand for large-size panels in the second quarter, TCL CSOT stated that it will dynamically adjust the utilization rate based on changes in market demand in phases and within a certain period of time, and has already made corresponding arrangements.

Overall, against the background of the gradual withdrawal of inefficient production capacity and some lower-efficiency high-generation production lines, the supply side has developed steadily and orderly, while new growth momentum has emerged on the demand side. The cyclicality of the panel industry has gradually weakened, and long-term development is expected. Based on development strategies and the latest financial reports, after the rational allocation of resources, panel manufacturers have begun to gradually improve operating returns. (Text: WitsView Janice)

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