Sharp plans a $9b investment in a new manufacturing plant to make LCDs and solar panels. Apple doesn’t make its electronic components but instead focuses on design and outsources production. The make vs buy strategic decision is still relevant and challenging!
Many electronic components quickly become commodities, so why would Sharp want to own its own manufacturing plant – in Japan no less, a high labor cost country? They claim that they will be able to pack enough distinctive technology into the LCD to allow them to earn a healthy profit. Whether this is a good idea or not will probably hinge on the nature of the technology. If the technology is modular, so that it can be designed without a specific manufacturing process in mind, then they will probably have a hard time. On the other hand, if the technology is integral to the product and its manufacturing process, then this could be the right decision. To explain further, Apple probably doesn’t need to know much about the manufacturing of flash memory chips to include them effectively and creatively in its iPods. Hence, the outsourcing approach can work for that technology. To answer whether in-house manufacturing is valuable or not with LCDs requires knowing more about the particular technologies they have in mind. Not surprisingly, they don’t reveal that information in the article.
WSJ July 9, 2008 – Sharp Focuses on Manufacturing