Sharp Corporation: Developing a Technology Strategy1

"We do not ask merely to expand our business volume. Rather, we are dedicated to the use of our unique, innovative technology to contribute to the culture, benefits, and welfare of people throughout the world."2

In 1992, Sharp Corporation celebrated its 80th year of business. The company began with the invention of "Ever Sharp" mechanical pencils by the founder Tokuji Hayakawa. Sharp also built Japan's first radio, TV and microwave oven, as well as the world's first all transistor-diode electronic desktop calculator and liquid crystal display (LCD). Sharp was gaining market share in components as shown in Table 1. Sharp was the undisputed world leader with over 39 percent of the $4.8 billion LCD market in 1993. Toshiba followed with only 11.5 percent of the market. Sharps electronic devices, lead by its sales of LCDs, grew 23.1 percent to $2.1 billion, or 33.7 percent of the companys 1993 sales. Electronic devices were expected to reach $5.4 billion in sales for 1994. Sharp estimated that the market for LCDs would reach a $10 billion by the year 2000. Sharps strategy had been based around its developed of such components as the LCD. The company's president, Haruo Tsuji, had a clear vision of the companys strategy as shown in Figure 1:
Sharp will continue to push development of proprietary devices and the creation of the next generation of innovative new products. A key device is a component which serves as a sort of "key" for realizing a certain product or system. These include LCDs, which are expected to see explosive growth as key devices in new multimedia products now on the horizon, and devices such as flash memory, optoelectronic components and solar cells. The development of key devices is particularly important. This strategy makes it imperative and essential that we strengthen our capabilities in engineering and development.

Sharps strategy was to develop a key component like the LCD, develop the products that use it, and then to improve the components and products ahead of competition. In 1988, Tsuji committed Sharp to becoming a full-range electronic company with opto-electronics as its core technology. Opto-electronics, which fuses light and electronics, surpasses conventional optical data transmission technologies in terms of data compression, reliability, and transfer rates. Spin-offs include LCDs, solar cells, laser diodes, EL (electroluminescent) devices, CCDs (charge-coupled devices) and LEDs (light emitting diodes). These technologies provide the key to growth in fast expanding areas such as audio-visual and data communications. According to Dataquest, Sharp had become number one in the world market for opto-electronics. Tsujis goal was to achieve a 60:40 balance between products and devices.

Copyright 1994 by William R. Boulton, Olan Mills Professor of Strategic Management, Auburn University, and Kosei Furukawa, Professor of Management, Keio University. This case was developed with support from Keio University's Graduate School of Business Administration. 2 This quote is taken from Sharp's Business Philosophy.

Figure 1: Sharp's Component-based Strategy

Home automation(Microwave oven and inverter air-conditioner) Office automation (copiers, faxs, PCs, WPs) Factory automation equipment Opto-electronic devices LAN, ISDN, CATV & data communication Compact discs Compact projection stereoscopic TVs Videodiscs Laser diodes LAN, ISDN, CATV & data communication Rewritable music disks

Magneto-optical disks

Audio-video equipment (TVs, VCRs, compact disc players, videodisc players, and tape recorders) Remote control units

PCs and workstations

High density Magneto-optical disks Cameras Large screen LCD Video camcorders IC cards Memory cards Notebook PCs Printed circuit boards Electronic organizers Personal computers & optical filing systems Data streamers VCRs Data transfer & Recording Components Rewritable music disks

Inverter air-conditioners

Laser beam printers

Cordless/portable telephones Ultra-compact antennas for Radio satellite HDTV communication broadcasting TVs & VCRs with built-in BS tuner VCRs for HDTV VSAT/Satellite Communication equipment Digital portable telephones TVs & VCRs Solar cars

Solar air-conditioners Meteorological satellites Solar cells Scientific observation satellites Radio Relay stations

Solar power stations

Unmanned light house Unmanned seismographic stations Solar power satellites

Communication satellites

Sharps Component Strategy

Optics technologies Materials technologies Thin Glass technologies IC technologies High-density mounting technolgies Signal processing technologies Data processing technologies Telecommunications technologies Image processing technologies

Table 1: Market Share for Components in 1993

LCD Panels (4,800 million yen sales) 23.1% Integrated Circuits (24,570 million yen sales) 8.3% 1. Sharp 39.1% 1. NEC 21.5% 2. Toshiba 11.5% 2. Toshiba 20.5% 3. Seiko Epson 9.8% 3. Hitachi 13.4% 4. NEC 8.8% 4. Mitsubishi 8.8% 5. Optrex 7.1% 5. Fujitsu 8.3% Other Light Converting Devices (88,410 million yen Light Emitting Diodes (LEDs) (90,550 million sales) 2.0% yen sales) 1.1% 1. Toshiba 21.1% 1. Sharp 34.5% 2. Stanley 20.4% 2. Sony 11.3% 3. Matsushita 18.8% 3. Toshiba 9.0% 4. Matsushita 7.9% 4. Sharp 15.5% 5. NEC 7.5% 5. Rohm 6.5% Source: Nikkei Sangyo Shimbun, June 22, 1994 and Market Share Dictionary (Yano Economic Research Institute) 1994.

The company was putting particular emphasis on the development of devices which link electronic technology with opto-electronics represented by LCD. According to Tetsuo Tani, general manager of the corporate accounting and control group:

Fortunately, the LCD has a strong market potential and Sharp has a 40 percent market share. Sharp is also the number one manufacturer in optical-devices, according to Dataquest. With those kinds of components, we can be profitable in the future. Beginning next July, 1995, we will open the largest LCD factory in the world. We are investing $530 million in our new LCD factory's first phase. In total, there are four phases planned that will cost over $1 billion.

Sharps strategy had provided continuing growth for the company with better performance than many of its much larger competitors. Table 2 shows financial performance of Japan's key electronics firms during the first-half of 1994. Sharp shows pretax income levels that surpass companies with sales levels twice the size. With operating income of over $310 million in the first half of 1994, Sharp was surpassed only by Hitachi Corporation, a company with over three times the sales revenues of Sharp. Hitachi, Toshiba and NEC showed the first gains in pretax profits in four years thanks to diligent cost cutting efforts and healthy demand for high-tech equipment -- in particular personal computers, liquid-crystal displays and computer chips. Fujitsu, which lost $137 million in 1993, made a profit of $221 million. Table 2: 1994 1st-half Performance of Major Electronics Companies
($ millions) Electronics Companies SALES 1st half FY1994 (end Sept.) (estimate) Matsushita 20,800 66,236 (-3.0%) (-6.5%) Hitachi 18,720 36,500 (-3.0%) (2.0%) Toshiba 15,210 33,000 (-0.9%) (1.0%) NEC 13,890 30,300 (4.3%) (4.5%) Mitsubishi 11,650 24,400 (2.0%) (2.0%) Fujitsu 10,220 22,500 (2.7%) (3.5%) Sharp 6,153 12,400 (7.0%) (5.0%) Source: Nikkei Weekly, October 31, 1994, p.8. and company reports. PRETAX PROFITS 1st half FY1994 (end Sept.) (estimate) 190 245 (5.0%) (-35.0%) 430 860 (44.0%) (20.0%) 247 650 (10.2%) (21.0%) 202 600 (184.1%) (88.0%) 270 590 (80.0%) (96.0%) 221 700 (n.m.) (142.1%) 311 640 (54.6%) (41.0%)

Leadership at Sharp Sharp Corporation had had three presidents. Over the years, these presidents have created an organization that values both technology and market inputs. Tokuji Hayakawa, the companys founder, emphasized products that competition would want to copy. Hayakawa founded Sharp in 1912 and invented the Ever-Sharp Pencil in 1915. In 1923, Sharps facilities burned down during the Kanto earthquake and Hayakawa moved to Osaka. In 1929, he developed and produced vacuum tube radios for export to Asia. He began producing televisions in 1953 and diversified into appliances and air conditioners in the 1960s. In 1964, Sharps introduction of the world's first all-transistor desktop calculator, called Compet, signaled the beginning of the calculator wars.

Akira Saeki emphasized new products that created new markets. Upon becoming president in 1970, Saeki canceled the company's participation in the Osaka "Senri" exhibition in order to build a semiconductor plant in "Tenri," becoming the thirteenth semiconductor manufacturer in Japan. The central research laboratory was also established. As shown in Figure 2, Sharp had introduced the first IC electronic calculator in 1966 using high density MOS ICs to reduce energy consumption and make smaller calculators. By 1973, the development of the COS electronic calculator incorporating a energy conserving liquid crystal display. Using its LSI film carrier system for the production of its 7mm-thin calculator, Sharp became the market leadership in calculators in 1976. The companys New Life Products strategy began to target the baby boomer generation in 1976 with new products that emphasized colors and design and introduced the first calculator using solar cells. The application of the film carrier system for assembly lead to lower prices and thinner calculators. As the calculator battles continued, new calculator models were being obsolete within a week of introduction by competition. The retail price of calculators had dropped from 350,000 yen in 1966 to 7,800 yen in 1979. Haruo Tsuji, promoted to president in 1986, emphasized the need to meet customer requirements. Tsuji became president in time to address Japan's endaka, the yen's appreciation in value. As higher valued yen increased export prices, sales dropped 10% and profits dropped 60%. According to Tsuji:
I became president of Sharp in June 1986 at the height of the yen-appreciation shock. Exports accounted for nearly 60 percent of Sharps sales at that time, and the production of consumer products accounted for nearly 70 percent of sales, so our company was deeply affected. In accordance with our companys philosophy, we did not lay off employees or cut salaries, but did carry out 116 emergency measures immediately, including cost-cutting measures and repricing of exports. However, a company that does nothing more than deal with immediate concerns has no hopes or dreams. We asked ourselves how we should change our operations and management over the next five to 10 years, formulated new scenarios, appealed for the support of our employees and set about the accomplishment of our goals one step at a time. The first goal was to shift emphasis to such growing fields as telecommunications and electronic devices even as we continued to seek growth in our consumer electronics business. We decided to bring our non-consumer electronics operations, which accounted for 32.6 percent of sales in 1985, up to 50 percent. This required a shift from labor-intensive assembly of physical input to knowledge-intensive production of products. Although we were in difficult straits, to achieve this goal we adopted a policy of emphasizing research and development, whose costs amounted to 6.2 percent (59 billion yen) of sales in fiscal 1985, and decided to bring them up to 10 percent. As part of our increased emphasis on non-consumer electronics products including devices, we devoted particular effort to development of our liquid crystal display business. We were looking for another mainstay for our business besides semiconductors, and this is what we chose from among many options.

Between 1978 and 1984, Tsuji had been responsible for Sharps visual equipment business and had recognized the need for a replacement technology for CRT displays.

Figure 2: Sharp Corporation's Calculator Innovations

First Sold Features Size W: 420 mm (16.5) D: 440 mm (17) H: 250 mm (9.8) W: 400 mm (15.7) D: 480 mm (18.9) H: 220 mm (8.7) W: 135 mm (5.3) D: 247 mm (9.7) H: 72 mm 2.8) W: 78 mm (3.1) D: 118 mm (4.6) H: 20 mm (0.8) W: 66 mm (2.6) D: 109 mm (4.3) H: 9.5 mm (0.4) W: 68 mm (2.7) D: 124 mm (4.9) H: 5 mm (0.2) W: 54 mm (2.1) D: 96 mm (3.8) H: 1.6 mm (0.06) W: 85.5 mm (3.70 D: 54 mm (2.1) H: 0.8 mm (0.03) Weight Price Main Components 530 transistors 2,300 diodes

1964

Worlds first all transistor-diode electronic desktop calculator (CS-10A) Worlds first electronic calculator incorporating ICs (CS-031A, with bipolar ICs) Worlds first electronic calculator incorporating LSIs (QT-8D electronic abacus) Worlds first COS electronic calculator (EL-805; worlds first practical application of LCDs) First electronic calculator with solar cells (EL-8026)

25 kg (55 lbs.)

535,000

1966

13 kg (28.7 lbs.)

350,000

28 ICs 553 transistors 1,549 diodes

1969

1.4 kg (3.1 lbs.)

99,800

4 LSIs 2 ICs

1973

200 g (7.1 ox.)

26,800

1 LSI 2 LCD drivers

1976

65 g (2.3 oz.)

24,800

Film carrier system with 1LSI

1977

Worlds first card calculator (EL8130)

65 g (2.3)

8,500

Film carrier system with 1 LSI

1979

Worlds first 1.6 mm (0.06)-thin electronic calculator (EL-8152)

36 g (1.3 oz.)

7,900

Film carrier system with 1 LSI

1985

Ultimate thin electronic calculator (EL-900)

11 g (0.4 oz.)

7,800

Film carrier system with 1 LSI

Tsujis second goal had been to increase the percent of domestic sales 39.6 percent, in 1985, to 50 percent. This required Sharp to more closely address the needs of their domestic customers. According to Tsuji, meeting customer needs was not easy:
Even if one asks them, there is no reason why they should know. To put ourselves into customers shoes means observing and analyzing their lifestyles and ways of doing business, anticipating how these might change and then taking products to them to see what they think of them.

Resulting new life products, included electronic organizers, dual-swing door refrigerators, home use facsimile machines, cordless telephones and answering machines, bolstered sales. Tsujis third goal was to increase the percentage of overseas production from 16.2 percent in 1985 to 50 percent. According to Tsuji, Our ideal is to carry out the entire gamut of manufacturing activities abroad, extending beyond production and sales to include research and development as well. By the end of fiscal 1993, Sharp had 52.8 percent of sales in non-consumer electronics products, 51.4 percent in domestic sales and 51 percent in overseas production. Tsujis management team was a relatively young group with ages from 50 to 60. It includes Taizo Katsura for administration and finance, Atsushi Asada for technology production, Kazuo Kubo for domestic markets, and Yutaka Wada for overseas markets. These four vice presidents and president Tsuji make up the executive committee. Sharp's growing creativity was considered a function of its youthfulness. According to Nikkei Sangyo's annual assessment of companies, it found Sharp to be the second youngest, behind Sony, amongst Japan's largest appliance companies. The measure is based on such items as new products and the average age of executives and employees. With Sharp's continued growth in 1994, Nikkei Sangyo newspaper calculated Sharp's average age at 33.7 years, down from 35.9 years in 1993. Rankings of major Japanese electronic makers in 1993 included: Company Average 1993 Age Sony 33.6 years Sharp 35.9 years Matsushita 37.6 years Sanyo 39.6 years Hitachi 39.7 years Toshiba 41.0 years Mitsubishi Electric 41.5 years Sharp's Changing Business Structure When Tsuji became president in 1986, two-thirds of Sharp's business was in appliances. Operating profits were only 0.8% in 1986 and 1.2% in 1987 with 70% of before tax profits coming from non-operating income. In May of 1986, Tsuji began restructuring (years change from 1992) 1.0 0.5 1.1 1.2 1.0 1.5 1.7

the business to reduce the heavy reliance on appliances. While only 9% of non-consolidated sales were in electronic devices (including ICs, electronic components, and LCDs) in 1985, nearly 30.5% of 1994 sales were in electronic devices with appliances accounting for only 15.9% of sales. Non-consumer products (i.e. copiers, facsimile, electronic organizers, and electronic components) had grown from about 32.6% of sales to almost 52.8% of sales between 1985 and 1993. Consumer products (i.e. color TVs, VTRs, camcorders, audio equipment, refrigerators, microwave ovens, and washing machines) had declined to 47.2% of sales, down from nearly 70% in 1985. Sharp's sales mix is shown in Table 3. Table 3: Sales by Product and Market Sector
Years Ended March 31 Television & Video Equipment Sharp Of Net Sales Year-On-Year Growth Audio & Communication Equipment Share Of Net Sales Year-On-Year Growth Home Appliances Sharp Of Net Sales Year-On-Year Growth Office & Industrial Equipment Share Of Net Sales Year-On-Year Growth Finished Products Share Of Net Sales Year-On-Year Growth Electronic Components Share Of Net Sales Year-On-Year Growth Total Net Sales 1990 3,741,360 27.8% - 0.5% 1,826,130 13.6% + 11.9% 2,349,090 17.5% + 2.3% 3,414,150 25,3% + 14.0% 11,330,730 84.3% + 6.1% 2,117,260 15.7% + 24.5% 13,447,990 1991 4,132,860 27.6% + 10.5% 1,928,400 12.9% + 5.6% 2,439,650 16.3% + 3.9% 4,020,720 26.9% + 17.8% 12,521,630 83.7% + 10.5% 2,439,480 16.3% +15.2% 14,961,110 1992 3,934,430 25.9% - 4.8% 1,716,330 11.3% -11.0% 2,656,740 17.5% + 8.9% 3,890,910 25.6% - 3.2% 1,2198,410 80.4% - 2.6% 2,976,970 19.6% + 22.0% 15,175,380 1993 3,642,560 24.7% - 7.4% 1,509,050 10.2% - 12.1% 2,502,380 16.9% - 5.8% 3,889,710 26.3% + 0.0% 11,543,700 78.1% - 5.5% 3,232,890 21.9% + 8.6% 14,776,590 1994 3,399,800 27.8% - 6.7% 1,486,980 10.0% - 1.5% 2,415,270 16.2% - 3.5% 3,750,900 25.2% - 3.6% 11,052,950 74.2% - 4.3% 3,848,140 25.8% + 19.0% 14,901,090

In the future, consumer electronic, electronic devices, and information and communication related products were expected to each account for one-third of the company's business. According to vice president Katsura:
This restructuring effort is bearing fruit. The company culture that values creativity is becoming firmly established and has helped our performance in recent years. The ViewCam and portable information tool which are related to LCDs where the company is beginning to earn a profit, had sales of $470 million and is a big earner in 1993.

In fact, Sharp's LCD sales in 1993 were $1,875 million yen. LCD related products had total sales of $3,461 million. In 1994, sales reached $2,450 million yen for LCDs and $4,452 million for related products. By 1994, Sharp did business in 135 countries, operated 20 sales offices in 18 countries, had 27 production facilities in 17 countries and four research facilities in three countries. Sharp's North American sales were over double the sales of either European or Asian sales as shown in Table 4. Most overseas operations were centered around the U.S.,

England and Germany. Export dependence was a growing problem as Japan's yen continued its appreciation. The Sharp brand was strong in overseas markets and exports had accounted for as much as 60% of sales in the early 1980s. Today exports were under fifty percent. Table 4: Sharp Corporation's Sales and Trends by Region
Years Ended March 31 Japan Share Of Net Sales Year-On-Year Growth North America Share Of Net Sales Year-On-Year Growth Europe Share Of Net Sales Year-On-Year Growth Asia Share Of Net Sales Year-On-Year Growth South America & Others Share Of Net Sales Year-On-Year Growth Total Net Sales Year-On-Year Growth Overseas Sales Share Of Net Sales Year-On-Year Growth 1990 6,744,170 50.2% + 7.8% 3,448,830 25.6% + 15.9% 1,782,210 13.3% + 10.0% 805,520 6.0% - 15.5% 667,270 5.0% + 15.6% 13,447,990 + 8.6% 6,703,820 49.9% + 9.4% 1991 7,503,830 50.2% + 11.3% 3,508,060 23.4% + 1.7% 2,182,510 14.6% + 22.5% 1,085,020 7.3% + 34.7% 681,690 4.6% + 2.2% 14,961,110 +11.3% 7,457,280 49.8% +11.2% 1992 7,749,350 51.1% + 3.3% 3,414,180 22.5% - 2.7% 1,863,020 12.3% - 14.6% 1,372,720 9.0% + 26.5% 776,110 5.1% + 13.9% 15,175,380 + 1.4% 7,426,030 48.9% - 0.4% 1993 7,140,840 48.3% - 7.9% 3,783,540 25.6% + 10.8% 1,644,010 11.1% - 11.8% 1,539,030 10.4% + 12.1% 669,170 4.5% - 13.8% 14,776,590 - 2.6% 7,635,750 51.7% + 2.8% 1994 7,439,160 49.9% + 4.2 3,765,720 25.3% - 0.5% 1,540,460 10.3% - 6.3% 1,535,960 10.3% - 0.2% 619,790 4.2% - 7.4% 14,901,090 + 0.8% 7,461,930 50.1% - 2.3%

Fifty percent of overseas sales today are supplied from local production. Sharp's integrated operation in Memphis, Tennessee, was producing color TVs, microwave ovens, and copier toner. Sharp began U.S. production of microwave ovens in 1979 and has been the number one selling brand since 1990. Sharp began making facsimile machines in 1985 in New Jersey and has held the top market share for six years. In Camas, Washington, Sharp was expanding LSI operations to include TFT-LCD production. Sharp had produced microwave ovens in the U. K. since 1985, appliances and components in Germany since 1968, continued to expand color TV production in Spain, and copiers and facsimiles in France. Sharp had also established operations in Asia. Malaysian operations, begun in 1990, produced over 20,000 VCRs per month. In Thailand, Sharp also produced microwave ovens, color TV, refrigerators, air conditioners and facsimiles for global export. In China, Sharp's joint venture in Shanghai produced air conditioners and was building a copier plant in Changshu. In July, Sharp acquired over 60 percent of an Indonesian licensee which will produce 120,000 refrigerators and 130,000 televisions with hopes to produce 180,000 by 1996. In addition to expanding overseas, Tsuji was looking at further reorganization:

We intend to revamp our sales and marketing organization to cope with changes in the market, and develop and train personnel to empower them and encourage creativity. Through this strengthening of our operational capabilities and with a company-wide restructuring aimed at transforming Sharp into a truly creative, truly international enterprise, we will work for even greater improvements in corporate performance in the future.

By 1994, Sharp had 63,900 employees worldwide, 29,500 were overseas and 34,400 were employed in Japan, including approximately 8,100 engineers in Japan and 900 overseas engineers. All of the 500 new employees hired over the past year were engineers. Sharp's Vision and Strategy All of the products created by Sharp have been the first of their kind in Japan. The company's Business Creed, based on the principals of sincerity and creativity, is shown in Figure 3. The company's creativity has been driven by top management visions, now called "Hayakawaism" after the companys founder. Hayakawas philosophy was to create products that others want to copy. His vision of the development of a new information age caused him to develop the first crystal radio in 1925. Tsuji commented:
Throughout history the real driving force behind the technological revolution has been the dreams and vision of human beings. I believe the building of a rich, comfortable future will depend on nurturing our imagination to envision new dreams, and extending technological creativity to make these dreams come true. Mr. Hayakawa always used to say, "Make products that people will follow and imitate." Our ex-president, Mr. Akira Saeki, now corporate advisor, always said, "you'll never make a contribution to society if you make the same thing as everybody else."

After seeing the impact of large scale integrated chips on the design of the Apollo space programs, Hayakawa believed they could be used to make calculators. Rather than participate in Japan's expensive annual electronic show in 1970, Hayakawa and Saeki built the central research labs and factory for semiconductors in Tenri, Nara Prefecture. By introducing semiconductors into consumer products at such an early date, they laid the foundation for Sharp to become the electronics company of today. Additional steps in Sharp's development were related to making the calculator smaller and lighter by replacing batteries with solar cells and developing smaller liquid crystal display panels. Development of high technology has supported the advancements in consumer and industrial equipment, and electronic components are considered to be the driving force behind such developments. Equipment that once had a single function now has multiple functions and is evolving into advanced systems with more sophisticated and integrated functions. As such development accelerates, more advanced performance, greater reliability, and further miniaturization are demanded of component engineers. According to Tsuji:
Rapid technological innovation is leading our civilization into a new era. Advances in electronics, in particular, have made life more comfortable than ever before imaginable, as well as contributing greatly to improved operations at all levels of business. Electronics are also broadening the scope of their potential contribution to global society, through progress in areas like opto-electronics -- a new technology utilizing the power of light.

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Figure 3: Sharp Corporation's Business Creed

Business Creed
Sharp Corporation is dedicated to two principal ideals:

"Sincerity and Creativity"

By committing ourselves to these ideals, we can derive genuine satisfaction from our work, while making a meaningful contribution to society.

Sincerity is a virtue fundamental to humanity...always be sincere. Harmony brings strength...trust each other and work together. Politeness is a merit...always be courteous and respectful. Creativity promotes progress...remain constantly aware of the need to innovate and improve. Courage is the basis of a rewarding life...accept every challenge with a positive attitude.

Sharp's general manager of electronic components, Minoru Miyuki, further explained:

As electronics technology advances at a remarkably quick pace, more and more consumer and industrial products become electronically controlled. We will continue to endeavor to spot the trends, meet customer needs, and contribute to the well-being of people and society at large. To live up to wide expectations from all over the world, we...will remain committed to creating technological seeds for the future.

President Tsuji says the company must make things that meet consumer requirements by looking at the products from the consumer's eyes.
Since we are a manufacturer, our business is to create products. Since many of our products are mature, out aim is to develop new products. It is the job of the LCD Group, the Electronics Components Group, the Integrated Circuits Group, and the Printing and Reprographic Systems Group to help revitalize or to help remake the mature products.

Figure 4 shows the conceptual coupling between Sharp's technological developments and customer needs. Ichiro Fujimoto, general manager for Sharp's corporate R&D group, explained:
New product concepts come from the customers' viewpoint. Engineers have ideas, but they typically look down on users. It is very important for the engineers to have the users' point of view. That took 10 to 15 years to do accomplish. The LDC is a prime example of that. If you want to develop something like that, you need a key component. You have to start applying that to come up with useful products. That process takes 20 years or so. You have to start by thinking about the kinds of

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products you want. Sharp's president keeps the users point of view in the front of our thinking. At the same time, we need engineers working on key components that can be used to develop products to meet their needs. Components, like LDC, can take 10 to 20 years to develop. In 1964, we had the first electrically operated calculator. It had about 5000 parts which made it too heavy and too large. We had to have ICs and LCDs for this product to make it smaller and lighter. ICs were started with the idea of making products lighter, not with the idea of making ICs and then trying to decide what to do with them. EL (electro-luminescence) was developed because we needed a low energy device. LCD was a device for making calculators thinner and lighter. That process is the key process for product development. The components were not the main focus, it was calculators that were our main focus. That means that it comes from the consumer's point of view, and not from technology first. The first LCD was used on a calculator in 1973. It is now 1994. That is 21 years ago. We are now talking about more applications. It started as alpha-numeric -- numbers and letters only. With more applications, we developed a dot structure, then added color. We then added image. The first major application is the ViewCam. There will be hundreds of more applications of this kind. We started research on the laser in 1970 and produced the first laser diode in 1981. The first business application was the compact disk. It took 20 years to develop the component. We are now developing a readable/writable optical hard disc that will hold 100 megabytes of data. Solar batteries have been under development for over 30 years. It started drawing attention from the consumer with the oil shock in 1970, but with the decline in energy prices it lost momentum. Now environmental issues are driving it. Farmers need clean energy for warming green houses. It hasn't taken off as a big business yet, but the possibility is there. There are three types: single crystal, polysilicon, and amorphous. Sharp is the only company certified as a single crystal solar battery supplier for satellites. You need decades of enduring efforts.

Figure 4: Sharp Corporation's Seeds and Needs Coupling

Areas for product development Undeveloped Markets

Seeds

Developed Technologies Developed Markets Undeveloped Technologies

Needs

Areas for research

Source: JMA Management Center ed. Sharp no Gijutsu Senryaku (Technology Strategy of Sharp) Tokyo: JMA, 1986, p. 47.

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Sharp's Research and Development Activities As shown in Table 5, it was management's aim to have R&D at 10 percent of sales. R&D expenditures for 1994 were budgeted at 108 billion yen. Tani explained:
The year 1985, about ten years ago, was a turning point for the corporation. Until then, Sharp was just an assembler. We purchased the parts and assembled them into products. We then realized that we needed to make our own components like LSI and LCD components. We then started to increase our R&D expenses. Sharp is a real engineering and R&D oriented company. Last year, R&D expenses were 9.3 percent of sales volume. Depreciation expenses were about 8 percent of sales. Together, is was 17.3 percent of sales for such expenditures. While R&D is currently down, we know it is really important for our future.

Table 5: Sharp's R&D Expenditures Year ending R&D (%)change March 31 amount from prior year 1987 590,220 99.9% 1988 594,700 92.9% 1989 671,560 112.9% 1990 782,470 116.5% 1991 893,510 114.2% 1992 981,290 109.8% 1993 1,035,320 105.5% 1994 1,083,110 104.6% 1995 planned 1,100,000 101.5%

As % of sales 6.8% 6.8% 6.8% 7.4% 7.8% 8.2% 9.0% 9.3% 8.9%

As shown in Figure 5, Sharp's R&D organization comprised 19 research laboratories, eight directly managed by the corporate research and development group, eight affiliated with manufacturing groups, and three reporting to the production technology group. Additional urgent project teams intersect the work of the research organizations. The corporate research and development group had responsibility for developing new materials and devices at the central research laboratory, and developed next generation devices at the functional devices laboratory. The energy conversion laboratory developed technologies for solar cells, air conditioning, refrigeration and noise-reduction systems. The software research laboratory developed next generation software. There were four overseas research laboratories. Sharp also had three production technology development laboratories. Sharp anticipated that the 21st century would be the age of multimedia, the combination of audio, text, graphics and animation. Sharp's new multimedia systems research and development center at Makuhari is focusing on next-generation image processing and communications, including integrated media, image systems, and telecommunications developments. Multimedia systems included integrated media laboratories for advanced human interface technology like virtual reality, image systems

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laboratories for digital imaging, and telecommunication research laboratories for satellite, mobile and ISDN devices. Sharp's manufacturing groups carried out applied developments of existing technologies and devices. This included the development of audio/video systems, digital audio equipment and data communications devices, home electronics equipment, optical devices, LCDs, modems, VLSI circuits and SRAMs, modems, digital telecommunications, consumer appliances, information and office automation equipment, and related software. Sharp was developing flash memory for its next generation products to make them more compact and cordless with longer battery lives. The company had also developed high speed LSI image processing for use with CCDs (charge-coupled devices) which convert light into electrical signals to make intelligent visual systems. Figure 5: Sharp's Research and Development Organization (April 1, 1994)
Research Laboratories at the Corporate Research and Development Group
Environmental Technoology Laboratories (Nara) Production Technology Development Center Precision Technology Development Center Production Technology Development Center CAE Center Information Technology Laboratories (Nara) Energy Conversion Laboratories (Nara) Software Research Laboratory (Nara) Materials Research & Analysis Lab (Nara) Sharp Laboratoriesof Europe, Ltd. (U.K.)

Multimedia Systems R&D Center Integrated Media Laboratories (Chiba) Telecommunication Image Systems R&D Center (Chiba) Laboratories (Chiba) Telecommunication R&D Labs. (Chiba)

Functional Devices Laboratories (Chiba)

Central Research Laboratories (Nara) Fundamental Researh and Development

Gold Badge Special Projects Teams Results Commission Work Liquid Crystal Display Laboratories (Nara) Electronic Components Laboratories (Nara) VLSI Development Laboratories (Nara) Printing and Reprographic Systems Product Development Lab (Osaka)

Product Development TV and Video Systems Product Development Lab (Tochigi) Communication & Audio Systems Product Development Lab (Hiroshima) Appliance Systems Product Development Lab (Osaka) Information Systems Product Development Lab (Osaka)

Sharp Microelectronics Technology, Inc. (Washington) Sharp Digital Information Products, Inc. (California) Sharp Technology Taiwan Corporation (Taipei) Source: Sharp Corporation

Research Laboratories at the Manufacturing Groups

Overseas, the integrated circuits group's operations included Sharp Microelectronics Technology, Sharp Digital Information Products in the United States, and Sharp Technology in Taiwan. Taiwan designed and developed integrated circuits and related components. The operations in Camus, Washington are for LSI and LCD research and production. Sharp Laboratories of Europe in the United Kingdom, the R&D development company in Oxford

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Park was established to commemorate the 80th anniversary of Sharp. It focuses its research on artificial intelligent applications for a seven language translation system for Europe. Sharp's production technology development group was responsible for advanced production and factory automation technologies. Sharp's intelligent manufacturing systems (IMS) linked various processes of design, production control and manufacturing via computer to rapidly accommodate changes in market activity and new technology trends. IMS had improved reliability and productivity, shortened development times, kept costs down and reduced inventory. Sharp's engineering global networked linked headquarters to all operating centers worldwide. This allowed for technical and engineering data to be shared with improved design and efficiency. The majority of funds for R&D were spent by the business units. About one third of the funds were spent for longer range projects. Fujimoto explained:
We used to have a factory based system, but shifted to a division based system last year. Each division has its own product development organizations that works on tomorrow's developments. The budget for these developments account for between 65 and 70 percent of the total R&D budget. The lower half is the divisional responsibility. The divisional R&D is for day-after-tomorrow developments. Corporate R&D focuses on long term developments. The corporate R&D group is responsible for the upper half of the R&D organization chart. The solar battery, software research, and multimedia all fall into the corporate R&D group. The multimedia center, at Makuhari, is new. These account for between 30 and 35 percent of Sharp's R&D budget. So there are three levels, tomorrow, day-after-tomorrow, and long term.

As shown in Figure 6, Sharp is known for its technological developments. In 1963, Sharp was the first in Japan to succeed in mass-producing solar cells that now power light houses, radio relays, highway signs, and other devices. In 1973, Sharp introduced the world's first commercial application of an LCD in an electronic calculator, and introduced it into word processors and PCs in 1986. Sharp was the first to mass-produce thin-film electroluminescent display panels. Sharp is the world leader in development of magneto-optical disks for mass information storage -- a 5.25" disk can hold over 325 million characters. Sharp was the first in the world to use a holographic element in the laser pickup for Mini Disc (MD) players, dramatically reducing the size of the read head and leading to the creation of the world's most compact MD player. Sharp produced the smaller CCD for use in compact 8mm camcorders. Sharp's typical response to crisis had been to develop the new components. After the oil shock of the early 1970s, the company decided to develop integrated circuits internally, as well as energy efficient LCDs. After the second oil shock of the late 1970s, a new factory for solar batteries and other technology for electronic components were built. Each crisis brought some new development and production of key components through clear objectives and the overall orchestration of corporate efforts. A new integrated circuit plant was located in Fukuyama, in Hiroshima prefecture. High speed image processing and voice synthesis LSIs are among the many kinds of integrated circuits now produced at this plant. Looking to the next generation of LSIs, Sharp is taking a special interest in flash memories. Even in plants where advanced LSIs and LCDs are being incorporated into finished products,

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the most advanced computers are used to provide integrated system controls. A vast amount of design know-how is needed and valuable data is used in all aspects of programming. The CAD design is sent to a rapid product machine where a mold is produced automatically. Figure 6: Sharp's Technological Developments (* Japan's first, # World's first)
Year 1912 1915 1925 1929 1953 1962 1964 1966 1969 1973 1976 * # * * * * # * # # # # # * # * # * # # * # # * # # # # # # # # # # * # # Development Approval of the Tokubijo snap buckle crafted for utility (designed by T. Hayakawa). T. Hayakawa's invention of the Ever-Sharp mechanical pencil. Assembly and marketing of crystal radio sets. Production of first AC vacuum-tube radio sets called Sharp Dyne. Development and mass-production of television sets. Development and mass-production of microwave ovens. Development and mass-production of the all transistor-diode electronic desktop calculator, Compet. Development and marketing of Japan's first microwave oven with a turntable. Development of electronic desktop calculators incorporating integrated circuits (ICs). Development of the negative resistance light-emitting diode (GND). Development of electronic calculators incorporating Extra Large Scale Integration (ELSI). Development of the COS electronic calculator incorporating a liquid crystal display (LCD). Mass-production of CMOS LSIs facilitated by the LSI Film Carrier System. Production of 7mm-thin electronic calculators utilizing these LSIs. Development of solar cells for use in the outer space utility satellite Ume. Development and marketing of the 1.6mm-thin electronic calculator. Development and marketing of the electronic translator of words and dialogues between Japanese and other languages including English. Development of the long-life laser diode. Development and marketing of stereo player with automatic both-sides disc playing. Development and marketing of the personal computer-television set, the result of integrating the computer with a TV set. Development of the low power for emission quantum well laser diode. Development and marketing of the VHD video disc player capable of 3-dimensional image reproduction. Development of a highly sensitive magnetic sensor using ceramic high-temperature superconductor. Development and marketing of the magneto-optical disk system. Development of an electronic organizer using Chinese characters. Development of the 14" TFT color liquid crystal display. Development of the 110" color LCD projector compatible with Hi-Vision HDTV system. Development of the 15" TFT color LCD panel with multi-media compatibility. Development of the single-transverse-mode high-power laser diode. Development and marketing of a series of 8.6" wall-mount TVs. Development and marketing of a 8.4" color TFT LCD unit. Development of the 16.5" wide-vision and multimedia compatible color TFT LCD panel. Development and marketing of HDTV set with "Simple-type MUSE Decoder" at a price of 1 million yen. Development and marketing of LCD camcorder with 4" color LCD monitor. Development and marketing of the world's smallest, lightest headphone MiniDisc players. Development and marketing of TV/VCR combination model VT-24WS1. Development and marketing of world's lightest personal plain paper copier. Development of world's first prototype 21" color TFT LCD display for multimedia use.

1979

1981 1982 1986

1987

1988 1989 1990 1991 1992

1993

1994

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Machinery designed and investigated by computer for heat and stress analysis are reflected in the favorable results of the production process. At the plant, computers keep constant watch over the needs for parts at each work shop and see that they are supplied by robot or other automated devices. A three dimensional, cognition robot produces an air conditioner. On the microwave oven line, the ovens go through a series of strict tests. On the copier line, repeated product quality tests are conducted by computer. Sharp's LCD Based Innovations To make the calculator smaller meant tackling the biggest problem, making the display smaller. The principles used in liquid crystal displays had been known for some time, but had not become a reality. Sharp engineers decided it could be done and developed the world's first electronic calculator, better, smaller and lighter. In a single stroke, the calculator was miniaturized. Sharp engineers wanted to use LCDs to display more than numbers and letters, by displaying images. In order to make advanced displays, Sharp needed the technologies to mount thin-film transistors on the 0.2 millimeter wide picture elements (pixels) that make up the unit. LCD production requires ultra-high precision production technology similar to those of LSIs. These ultra-high precision mounting technologies presented a huge challenge. In October, 1986, Tsuji made what was known as the "LCD shift." According to Mr. Saruda of Nikkei Research Center, "In addition to facing the technological challenge, it was the internal development of these key components for future applications that was envisioned." The idea was to give liquid crystal a new role as a kind of electronic paper that could accept electronic input. The dream then grew to include larger and larger sizes, and better and better image quality. The LCD division was established within the electric parts business unit and an LCD research center was established within the corporate development center. Located within this center is an LCD plant whose facilities are at the leading edge of technology. Because LCD's hate dust particles, at this factory the amount of dust particles is limited to less than 10 particles, each three ten-thousands of millimeter in diameter, within a volume of one cubic foot. That is 300,000 times cleaner than a typical office. In 1986, the first TFT-LCD color TV was successfully introduced. In 1987, the 3inch color LCD TV using TFT was introduced. In 1988, the world's first 14-inch LCD display was developed. In 1989, the 100-inch LCD projection system was introduced. In 1992, the Sharps LCD ViewCam was introduced. Sharps LCD developments have include:
1970: set up the development center in Tenri 1973: 1st calculator using LCD display 1986: established LCD division and LCD research center 1987: introduced 3-inch LCD color TV 1988: developed the 14-inch TFT color display 1989: introduced the 100-inch LCD projection set 1991: built a new LCD plant at Tenri and in the Washington state, U.S.A. 1992: developed 17-inch TFT color display and introduced the LCD ViewCam. 1993: began construction of new LCD plant in Mie Prefecture. 1994: developed 21-inch TFT color display for multimedia use.

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The 3-inch color TV resulted in the development of advanced image technology called "normally white," meaning that the LCD looks white when the power is off. It was applied to the LCD projection set to get larger picture sizes. LCD parts were applied to the TV set projector and the ViewCam. New technology helped the company to create new segments and hold a dominant position in those markets. According to Tsuji,
In order to expand our LCD business, I am working to achieve breakthroughs in three complementary areas. First, we intend to push development of high-level LCD technology. Second, we intend to make a breakthrough in production technology so we can offer reasonable prices. Third, we intend to push development of products that use LCDs. Advanced components produce a group of new products that generate the next generation of products out of mature products.

In response to the current recession, Sharp was focusing again on the development of key components. In R&D, the central focus was on improving the light characteristics of LCDs through semiconductor developments for use in next generation products. While multimedia business opportunities were still unclear, Sharp planned to continue developing new and better selling products related to LCDs. The real test would come as the battle for multimedia business brings in many new competitors. TFT Improvement Efforts TFT-LCD is Sharp's core technology. For LCDs to challenge the $10 billion CRT market, Sharp is looking to develop the next generation thin-film-transistor by the year 2000. Between 1993 and 1995, Sharp planned to invest one billion dollars in LCD-related product R&D including the construction of the next generation of TFT-LCD. The objectives of its new development theme included reducing the thickness by half, increasing the brightness, and increasing the picture size. Sharps "next generation LCD display kinkyu project" included 42 people selected from across the organization. Eight of the 42 were immediately transferred to their new post under the supervision of the video business division manager. Team members were selected from the information technology research center, the optoelectric business division, and the IC business division. They were not necessarily replaced in their old organizations. LCDs are already much thinner and lighter than traditional CRTs. Efforts to make TFT screens even thinner were steadily producing results. The 9.5 inch color TFT for personal computers is 10 millimeters thick and weighs 590 grams. Compared to 1990, it is one half the thickness and one-third the weight. The thinnest TFT is Mitsubishi's 9.5 inch LCD with 8.9 mm thickness and 550 grams in weight. It incorporates a 3 mm diameter cold cathode tube for backlight and uses automated tape bonding for automated assembly. At the 6.4 inch size LCD, Sony builds 6.8 mm thin models. This is the thinnest product ever developed and may be used for "color" information terminal applications.

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Since LCD doesn't generate its own light, it needs a light source, called backlight, to give its brightness. More backlight increases power consumption which detracts from the merits of LCD. The final brightness level represents only a few percent of the original light source. Light emitting tubes have 300 candela per square meter but TFT emits only 100 candela. Brightness depends on the area of one pixel that is "open" for light to emerge. Half of the light source's output is absorbed in the process. Metal parts used in TFT devices, the color filter, and polarization all restrict or absorb light. Miniaturization and microfabrication cannot solve this problem. Continuing Pressure on Performance Despite strong international sales of Sharp's new ViewCam and electronic devices such as LCDs and semiconductors, consolidated overseas sales declined by 2.3 percent between fiscal years 1993 and 1994. During 1993, the world economy continued to have mixed results. While business activity in the U.S. was showing signs of recovery, ASEAN countries and China exhibited growth rates around ten percent. Japan's economy remained flat, depressed by limited personal spending and restrained investment in new facilities and equipment. The continuing rise in the value of the yen, and the effects of an unseasonably cool summer of 1993, had further dampened Japan's economic growth. Despite favorable overseas conditions, Sharp's overseas sales were down from $7.6 billion in 1993 to $7.3 billion in 1994 as shown in Table 6. In the Japanese market, where the economy had yet to recover, innovative products like the ViewCam showed healthy growth along with electronic devices. Domestic sales increased by 4.2 percent, up from $7.1 billion in 1993 to $7.4 billion in 1994. Consolidated sales increased 0.8 percent, from $14.8 billion in 1993 to $14.9 billion in 1994. Net income increased 7.4 percent, up from $296 million in 1993 to $318 million in 1994. In response to the continued recession in 1994, Tsuji further adjusted the organizational structure so that each manufacturing group had associated product development laboratories. According to president Tsuji:
We also prepared for the next generation of key products by further reinforcing our business organization to promote mobile communications products and new portable information terminals, in our ongoing effort to create outstanding new products that meet the ever-changing needs of consumers. We developed progressive new ways of conducting business company-wide, bolstering our domestic and overseas production technologies, enriching the marketing system, revitalizing corporate personnel and organizational systems, and trimming costs wherever possible.

Sharp also attempted to compress total assets to make the company more efficient. Total assets were reduced in the first half of 1993, ending in September, by $245 million as compared to $500 million in the prior year. Inventories were reduced by $132 million in six months compared to $163 billion over 12 months. Inventory amounted to 1.2 months supply. As shown in Table 7, capital investments was being held around $800 million through 1993 and 1994, keeping investments within the depreciation range. For the years from 1990 through 1992, capital investment had been held around $1.1 billion. Interest

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bearing liabilities increased from $1.9 million to $2.3 billion by September, resulting in an increase from 51.9% to 55.1% in the debt to equity ratio as compared to 40.6% in 1985. Table 6: Sharp's Consolidated Financial Highlights (Years ending March 31)
($ 000) Net Sales Overseas Sales Income B/T Net Income Net Income per Share Dividends per Share Shareholders' Equity Total Assets Acquisitions of Plant and Equipment Depreciation and Amortization R&D expenditures 1994 14,901,090 7,461,930 610,830 317,920 .2875 .1100 8,184,240 20,322,190 1,049,980 1,086,840 1,106,910 1993 14,776,590 7,635,750 581,720 296,120 .2773 .1100 7,669,030 20,999,190 1,016,260 1,080,720 1,062,020 10,683,830 418,360 1992 15,175,380 7,426,030 831,030 390,570 .3666 .1100 7,555,610 21,476,800 1,313,730 1,001,070 1,011,120 10,667,030 410,290 1991 14,961,110 7,457,280 996,480 469,180 .4422 .1100 7,267,630 20,770,300 1,226,700 896,250 909,800 10,631,130 365,390 1990 13,447,990 6,703,820 935,110 417,200 .4151 .1100 6,853,510 20,325,980 1,166,750 750,320 799,490 10,543,590 340,170

Number of Shares Outstanding (000) 11,056,360 Number of Employees 428,830 Source: Sharp Corporation Annual Report for 1994.

Table 7: Sharp's Capital Investment Year ending Investment amount Change from March 31 ($ 000) prior year (%)
1987 1988 1989 1990 1991 1992 1993 1994 1995 516,390 479,900 721,810 1,113,620 1,089,640 1,119,010 807,700 869,690 1,100,000 planned 74.9% 92.9% 150.4% 154.3% 97.8% 102.7% 72.2% 107.7% 126.5%

Depreciation/Amortization ($ 000) % of sales

750,320 896,250 1,001,070 1,080,720 1,086,840

5.6% 6.0% 6.6% 7.3% 7.3%

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Appendix LCD Technologies Liquid crystal displays (LCD) was considered to be the second semiconductor industry and was seen as the industry to sustain Japan's prominence in hi-tech products into the 21st century. If semiconductors were equated to Japanese rice, then flat panel displays, like LCDs, were like a new strain of rice. It was considered an indispensable part of Japan's sustained economic growth. The liquid crystal phenomenon was discovered by F. Reinitzer, an Australian, in 1988. He found an organic substance which was between a solid crystalline and liquid state within certain temperature ranges. Unlike usual liquid substances, liquid crystal demonstrated a crystalline structure and related refraction characteristics. Depending on the crystalline states, different refraction's are possible.
1. In the pneumatic phase, the long axes of the molecules lie in a largely parallel orientation with a random distribution of molecules. 2. In the smectic phase, the parallel orientation of molecules are structured into layers. 3. In the cholesteric phase, the layers of parallel structures are stacked in a spiral structure. Reinitzer found this phase to act as a thermo-sensor. 4. In the discotic phase, a structure of plate-style molecules are combined like cylinders. This phase was discovered in 1977, but has yet to find an application.

Calculators, digital watches, portable word processors, and note PCs all use nematic liquid crystal which change their structure with the application of electric voltage. The LCD panel is formed by sandwiching liquid crystal between a set of super thin glass plates attached to electrodes and polarized films. The twisted nematic (TN) technique is the basic method used for liquid crystal displays. The nematic liquid crystal properties are used to obtain two parallel orientations of molecules. The polarizing films that sandwich the liquid crystal are criss-crossed when the current is off, and the liquid crystal aligns its molecules in parallel with the polarized film. Thus the molecules are twisted at right angles between the films. Incoming light twists at right angles through the molecules and penetrates the other side. If voltage is applied to the cell, the molecule's orientations are straightened and light can no longer penetrate the film. The segment electrode method is applied in calculators and digital watches. Generally seven electrodes are placed to indicate one digit number. Depending on the combination of electrodes that are activated, a number is created. Dot matrix techniques are used to display more complicated patterns of alphabets, symbols, and graphics used in word processors or PC notebooks.

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Passive matrix, or simple matrix techniques are composed of vertically and horizontally paneled slim belts or electrodes and an intersection of a pair of perpendicular electrodes called dots or pixels. When both axes of electrodes get voltage, the pixel shows an "on" status. Active matrix techniques utilize a separate switch for every pixel. This provides a better image contrast than the passive matrix. The application of these technologies results in three LCD types:
1. Super Twisted Nematic (STN) is a passive matrix system that uses a twisted angle of more than 180 degrees. It is capable of making larger size LCDs than TN types. 2. Thin-Film Transistor Twisted Nematic (TFT-TN) has transistors switches located at every pixel. Its production cost is much higher than passive matrix, but it provides a much higher, sharper image that is more suitable for color displays. The larger the display, the greater the perceived difference in display quality. 3. Metal-Insulated-Metal Twisted Nematic (MIM-TN) is essentially the same as TFT-TN, except that it uses a thin-film diode for its switching device. The quality is relatively lower than the TFTTN type, but is cheaper to manufacture.

In comparing the quality and cost of these three types of LCDs, the Table 8 provides comparisons of STN, TFT, and MIM displays. Table 8: LCD Technology Comparisons
Type of LCD STN Passive TFT Active MIM Active 100:1 100 50 80 weak little 2,000 10,000 50% 35,000 79,000 Quality: display contrast 20:1 150:1 viewable angle 60 120 response speed (ms) 300 50 brightness (candella/m2) 60 60 flickering strong weak voltage leaks (crosstalk) high almost none Cost: (yen) 2,000 25,000 glass cutting 8,000 8,000 color filter and assembly 50% 50% yield percentage 28,000 30,000 module cost 48,000 96,000 total cost Source: "Flatpanel Display 1992," Nikkei Business Publications, p. 73.

The TFT-TN display uses a combination of traditional nematic liquid crystal and microscopically small, thin film transistors. These transistor switches are located on each individual picture pixel and have a function of improving deficiencies in twisted nematic. TN cannot store the picture data without continuos electric voltage to keep the image on the display. This voltage is only supplied by the transistors. TFT-TN is expensive to produce and are difficult to produce in larger sizes. A single pixel that does not work will cause the display to be scrapped. With market demand growing for more and larger LCDs, the number of pixels per square inch must also increase, making

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the problem more serious. Screens of standard personal computers comprise about 300,000 pixels. Modern television sets have 600,000 pixels. High resolution systems, like those used for CAD applications, require as many as 10 million or more pixels. An Alternative Technology One alternative to TFT-TN technology is called ferroelectric liquid crystal (FLC). FLC applies a passive matrix structure and the structure is far less complicated. For example, in case of a display with 1000 x 1000 pixels, FLC needs only 2000 electrodes compared to 1,000,000 TFTs. FLC also allows for rapid switching, vivid pictures and can store data. No voltage is needed to maintain the picture. The costly TFT transistor is replaced by the material itself, thereby reducing the cost of production. This allows for high quality, high resolution applications. FLC technology has several technical hurdles to overcome before it is commercially applicable. The most significant problem is the quality of alignment of the smectic phase, on which the technology is based. It is more sensitive to mechanical stress than the nematic phase used for TFT displays. Development of practical ferroelectric LC mixtures will be key for its technical success. The major players in the LCD market are currently concentrating on TFT-TN display technology. As shown in Tables 9 and 10, they are investing heavily in production facilities. It will be a number of years before LCDs will displace CRT displays. However, if FLC technology is developed, it could quickly displace TFT with a lower cost, high quality display that could be used for most CRT applications. Table 9: Production capacity of large size color LCDs
Competitors TFT sheets/month Sharp 45,000 NEC 20,000 Toshiba 20,000 Seiko-Epson Hitachi 5,000 Sanyo Kyocera Source: Yano Report, June 10, 1993. STN sheets/month 45,000 10,000 5,000 15,000 1,000 Planned capacity 90,000 TFT, 90,000 STN 84,000 TFT 30,000 TFT, 25,000 STN 10,000 STN -

Table 10: Investment for Production by Major LCD Manufacturers (billions of yen)
1990 1991 Sharp 3.2 3.5 Toshiba 2.5 1.5 NEC 1.0 2.0 Hoshiden 2.0 Casio .6 1.3 Fujitsu 1.0 Canon Source: Yano Report, June 10, 1993. 1992 4.0 2.0 1.2 4.0 3.8 2.7 1.5 1993 1994 8.0 8.0 2.0 1995

2.0

Sharp had about 40 percent of the LCD market. Production sites were in Nara and Tenri Japan. Investment was planned at 80 billion yen between 1993 and 1995, to primarily
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increase TFT production. Capacity of TFT production was to increase to 95,000 sheets per month in 1995, with the opening of the world's largest flat panel display factory in Mie Prefecture. Growth in STN production was being increased from 45,000 sheets per month. Toshiba was producing a full range of displays. Small and medium sized TFT and STN displays were produced in Himeji; TFT and STN at Fukaya, and large sized TFT at were being produced in a joint venture with IBM for PC and workstation applications. NEC specialized in TFT for PCs, and planned to produce small and medium sizes for car TVs and navigation systems. In-house consumption accounted for 90 percent of use. Seiko Epson produced monochrome STN and TN in its Toyoshima factory, but was expanding into MIM and TFT in its Suwa facilities. Small TFTs were supplied for viewfinders.

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