Twists and Turns in Sharp vs. Sony Battle for LCD-TV Market Share (SCHAY, SNE)

| About: Sony Corporation (SNE)
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The battle between Sharp Corp ( and Sony (SNE) over LCD-TV market share in the U.S. has gone back and forth and the news coming out the past two days has left no indication of which company is in a better position, despite Sony's overall lead.

Sharp initially dominated the U.S. market, controlling 25% prior to Sony's introduction of its Bravia model for the holidays. Sony went on to quickly move ahead of Sharp, pushing the latter's share down to 18%. Let's take a look at the latest developments, which are bad news for each but another's bad news can of course be good news when you are competing.

First, the Wall Street Journal reported yesterday that "Sharp may turn to Taiwan makers for LCD Panels" (story by Kanji Ishibashi, print edition). This is not at all surprising given that Sharp is well aware of demand for LCD-TVs outpacing supply -- very similar to its solar cell/system business. Sharp has allocated considerable resources towards ramping up production of LCD panels and is even trying to move up the launch date of its 2nd Kameyama factory. There are no firm details coming out of Sharp regarding Taiwanese partners but Sharp executives who spoke to the WSJ said that quality is a top priority. Taiwanese display manufacturers Quanta Display Inc. and Chi Mei Optoelectronics Corp., are reportedly two possibilities.

Sony was criticized for its JV with Samsung to produce the panels that Sharp is coming up short with because it was seen as lacking the technology and too much of a late-comer. So what? Now Sony seems more capable of meeting demand than Sharp. Sony and Samsung chose to collaborate to an extent while still competing as arch-rivals. Sharp is moving in the right direction towards collaboration, but must move quickly because it is no longer in the top spot. The WSJ quotes Sharp's head of overseas business saying, "We aren't worried because we are confident that we can recover this year," placing high hopes on the 2nd Kameyama factory coming online and boosting capacity this autumn. Sony itself recognizes the difficulty in meeting strong global demand and has since increased its investment with Samsung in their JV.

Sony's bad news came out earlier today in Japan. 400,000 or more of its Bravia model rear projection LCD-TVs (42" and 50" models) have a glitch that causes the power button (on/off) to stop working after having watched the TV for more than 1,200 hours. Sony found that the software that controls this function contains an error and is now offering a software patch. It is also offering home repair services in Japan for those who cannot download the software. Of the 400-thousand defective models, only 6,545 are in Japan while a majority of the rest are in North America and China. Sony hasn't said yet what it will do to remedy the problem overseas. Sony also said its flat panel LCD Bravia model is unaffected by the software glitch, and that it doesn't see the glitch affecting its rear projection LCD-TV sales targets for the current quarter.

SHCAY 1-yr chart:

SNE 1-yr chart: