Planned obsolescence used to refer to gadgets. Now it describes gadget makers’ profit forecasts. Take Sharp. Eight days after closing the books on fiscal year 2008, the Japanese electronics manufacturer on Wednesday scratched out its two-month-old forecast for an operating loss of $300m and replaced it with a number twice as big. As recently as February, it had been forecasting a $1.3bn profit. Predictability has gone out of the window alongside economic growth, fat bonuses and fiscal rectitude. Sharp’s real problem, however, is not that it is changing its numbers but that it is not changing its tune.
The business strategy articulated on Wednesday restates much of the February recovery plan: shunting round production of liquid crystal display panels, axing 1,500 contract workers, and excising $2bn of costs. Making more of its products closer to where they are sold abroad will help Sharp. But ramping up overall supply when demand is so depressed will not. Sharp will increase capacity by 36,000 LCD panels a month when its new plant opens in October. Furthermore, most of these panels have to translate into increased TV sales since eight out of 10 of them are for Sharp’s own use. Meanwhile, Sharp’s biggest LCD plant is running at full capacity, but only because its next biggest plant has been temporarily shuttered.
Investors appeared unimpressed, pushing the shares down 6 per cent, but that may just reflect profit taking: Sharp had been up 36 per cent this year, against a falling market. That rise may have more to do with everyone’s favourite buyer of last resort – the government – than anything else. Japan’s latest stimulus has plenty for electronics manufacturers, including subsidies for flat-screen TVs and energy-efficient appliances. Like other Japanese companies, Sharp and its ilk can tap various government channels for funds. Who needs a plan when the hand of the state can give you a lift?
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