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19Seiko Epson Annual Report 2005
Low-temperature
polysilicon TFT
LCD modules
MD-TFD
LCD modules
Amorphous silicon TFT
LCD modules
technological capabilities. Leveraging
these skills, Sanyo Epson is determined
to rise to the top of the small- and
medium-sized LCD field.
Accelerating Structural
Reforms to Realize the Goals
of “Action07”
Since the second half of the fiscal year
ended March 31, 2005, plummeting
prices and escalating competition have
made for a challenging business
climate. In this context, Epson is imple-
menting a host of initiatives for creating
a structure for securing stable earnings
to achieve the objectives of “Action07.”
As a first step, Epson decided to
withdraw from production and sales of
15-inch and larger 움-TFT LCDs, where
price erosion has been most dramatic,
and switched production lines to
upgrade capacity for small- and
medium-sized LCDs. Epson is also
working to reform its cost structure by
reducing costs for components and
materials purchased externally, boosting
yields, and cutting fixed costs. By
accelerating these reforms, Epson is
confident that clear benefits will begin
emerging from these reforms during
the fiscal year ending March 31, 2006.
Enhancing Back-end Module
Mounting Capabilities
Sales volume for mobile phone LCDs
should increase substantially in the
coming years, yet the market is also
characterized by severe fluctuations in
short-term demand. To cope with
these changes, Epson must build a
production framework for flexibly
responding to customer demands
while minimizing inventory. But most
importantly, Epson must ensure that
its back-end module mounting capa-
bilities are securely in place. Back-end
processing has long been a strong suit,
and Epson has also amassed exper-
tise in the “just-in-time” production
indispensable to the manufacture of
mobile phone LCDs. Going forward,
Epson plans to bolster mounting
capabilities and increase in-house
manufacturing at its bases in the
Philippines and China to create a more
efficient production framework.
Advancing Into New Fields
Sales of LCDs for mobile phones
account for a substantial percentage
of Sanyo Epson’s net sales. For this
reason, broadening its business
domains to develop a structure that
can resist fluctuations in the mobile
phone market has emerged as a key
issue for Epson to ensure medium- to
long-term profit stability.
Demand is rising for LCDs, a field
that includes displays for LCD televi-
sions, mobile phones, digital cameras,
onboard automotive equipment,
multimedia players, and other devices.
Epson, by leveraging its skills in areas
such as compactness and higher reso-
lution, will deliver competitive LCDs
and expand its business domains in
an effort to generate more sales
outside the mobile phone sector.
Black and white STN
Active high end
Active volume zone
Color STN
Mobile phone LCD market trend
0
800
600
400
200
2004 2005
(estimate) 2006
(estimate) 2007
(estimate) 2008
(estimate)
(Years ending March 31)
Source: Based on data compiled
by the Company.
Note: Subpanels not included.
(million units)