At a time when most companies are fleeing manufacturing in fear, a handful are still seeing it as a way to create competitive advantage.
In an old seaport city near its Osaka headquarters, Sharp Corp. is
building a $9 billion factory complex the size of 32 baseball stadiums
to make liquid-crystal-display panels and solar panels. The complex,
which Sharp broke ground last November, will be the world’s largest LCD
and next-generation solar panel plant when it is ready sometime in the
next fiscal year, ending March 2010.
One of the unique attributes of Sharp’s new factory, although similar to a concept that Toyota and some other auto companies embrace, is the co-location of suppliers.
It will house most of its major suppliers on the same premises. Designed for both LCD’s and solar panels, which share a similar manufacturing process, it will include factories for its major suppliers including Asahi Glass Co. and Corning Inc., which makes the glass for the panels.
Sharps’ investment runs counter to the philosophy of many other electronics firms.
While Apple Inc. is leading a trend in the electronics industry to outsource hardware manufacturing and focus on design and software, Sharp is making a huge bet that keeping manufacturing of LCD and solar panels in-house will give it a big competitive advantage.
Still, if Sharp continues to be successful, the focused-manufacturing strategy could be a model for other Japanese electronics makers, which find Apple’s outsourcing model a turnoff and are still trying to figure out a way to remain a manufacturer while growing its profit in an industry that is rapidly commoditizing.
That commoditizing is a concern, so CEO Katsuhiko Machida is betting on a change in market dynamics.
"There will eventually be no distinction between a parts manufacturer and an electronics maker," says Mr. Machida, adding that LCD panels have the potential to embed so much technology that a television in the future could consist of just a panel and a plastic frame. When that happens, Mr. Machida figures that the parts makers will profit even if the finished goods become commoditized.
Good luck to Mr. Machida; it’s great to see a CEO recognize the value of an internal manufacturing competency.