Sharp's New Focus

How an also-ran made a bet on flat-panel televisions as the critical path to being a major player in electronics

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Hiroshi Take, one of the managers of Sharp Corp.'s latest and most advanced television factory, beams like a proud father. The gleaming white $1.4 billion Kameyama factory, 260 miles southwest of Tokyo, came online last year and is cranking out thousands of Sharp's hot-selling large-screen flat-panel Aquos TVs per month. Flat TVs are going to be critical in the battle for market share among electronics companies this Christmas season, and Sharp is exceptionally well armed.

As a belt carrying newly assembled TVs to their final quality checks churns behind him, Take emphasizes that Aquos is not just Sharp's latest hit product. It is the core of a strategic shift that has transformed the company from a perennial also-ran to Asian rivals like Sony, Matsushita and Samsung into the world's hottest electronics company. "Everybody from 1 to 100 uses a TV, many of them for three to five hours a day," he says, clearly delighted by the thought of all of us plopped in front of so many idiot boxes, each of them potentially bearing a Sharp logo. "Television," he says, "is the monster electronics product."

Sharp got its flat-screen focus from Katsuhiko Machida, the company's president, who for years fretted that his outfit was doomed to be a second-tier player. When he ran Sharp's television business in the 1980s, Machida says, the firm had trouble competing because it didn't manufacture the most important TV component, the cathode-ray tube. Forced to cobble together parts bought from competitors, Sharp was little more than an assembler, cranking out sets that were always a little too expensive and a little too poorly engineered to attract many customers. It was a dispiriting struggle, says Machida, but it taught him an ironclad belief that is now axiomatic throughout the company: "If you are in electronics and you are not strong in TVs, your business and your brand will suffer."

When Machida became president in 1998, he wasted no time acting on his theory. Sharp, he knew, had long excelled at developing products featuring liquid-crystal displays (LCDs). It released the first mass-market LCD calculator in 1973, developed its first flat-panel LCD TV in 1987 and dabbled in LCD televisions throughout the 1990s. Building on that foundation, Machida moved LCD TVs to the forefront of Sharp's strategy. He spent heavily over three years on the design, manufacture and marketing of a new flagship TV brand dubbed Aquos, and his bet paid off. Launched in January 2001--a moment referred to inside the company as the Big Bang--Aquos quickly became the coolest name in TVs since the Sony Trinitron. Sharp is now the world's biggest seller of LCD televisions, accounting for 1 in 4 of all LCD sets sold.

Sharp's momentum has been a drag for struggling Sony, which recently brought in a non-Japanese CEO, Howard Stringer, to orchestrate a turnaround. Sony also demonstrates Machida's theory: the company has lost its primacy in TVs, and it shows. In July, Sony reported a quarterly loss of $330 million in its consumer-electronics division. Sharp, meanwhile, posted operating profits of $138 million for its consumer-products division.

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