The company has opened a $170 million factory with the capacity for eight assembly lines on the same grounds as Sharp's current factory, which began producing the bulkier, cathode-ray-tube televisions in 1997.The new maquiladora factory about 20 miles south of San Diego and completed in July, represents an injection of faith in Mexican manufacturing despite competition from countries such as China and India that have been wooing global companies with tax incentives and cheaper wages.
The state of Baja California has about 900 maquiladoras, which are mostly foreign-owned plants that import materials and equipment duty-free to assemble finished products that are usually sold abroad.
"There is an excellent confidence in Mexico, in Baja California, based on something very important: the human element, the people who are here and who come here from all parts of Mexico," Baja California Gov. Eugenio Elorduy Walther said at a ceremony Oct. 15 that marked the opening of the Sharp factory.
Plant officials allowed guests to tour the factory, where workers dressed in white jumpers and plastic booties worked at the three assembly lines. About 2,300 employees work there, producing Aquos LCD TVs 24 hours a day, seven days a week. Production is 200,000 units a month and will increase to 400,000 units a month in fiscal 2009 as the company adds additional lines and hires about 1,700 more employees.
Sharp executives estimate that demand for LCD TVs in the North American market - primarily the United States - will be 23 million units in 2007. That is expected to increase to 33.5 million by 2009 and 39 million in 2011, they said.
More people are buying high-resolution televisions as manufacturers iron out past kinks and the sets become more affordable. In addition, the U.S. government's mandate to convert from analog to digital formats by 2009 is likely to propel sales.
Japan-based Sharp developed the LCD technology, and the company is among the main producers of LCD televisions for North America with a 9.1 percent market share in the second quarter, according to research firm DisplaySearch of Austin, Texas. For the quarter, Sharp trailed Vizio with 12.1 percent of theLCD market share in North America and Samsung with 10.7 percent.
Sharp's production changes indicate a shift in strategy toward bigger screens. Plasma televisions cornered the large-screen market in recent years, while LCD was used mostly for screens smaller than 40 inches.
Both plasma and LCD TVs are expected to eventually replace the older-generation televisions. The Rosarito Beach plant will stop making the older models this year to focus exclusively on LCDs.
The models produced at the new factory are in the D64 line. With demand greatest for sets with screens that are 40 inches and larger, the new factory will be used to make models that are 42, 46 and 52 inches. They will cost $1,999 to $3,199.
Sharp Corp. chief executive Katsuhiko Machida said the Rosarito Beach plant will play an important role in the company's worldwide production with its cutting-edge processes, which rely more on work done in Mexico.
Typically, the company shipped all its LCD models with the glass screen and module section as a single piece. The module includes the backlights, polarization and other elements. At the Rosarito Beach plant, this already-prepared portion was attached to the cabinet, or frame section.
The original plant will continue this process. But at the new plant, the glass screens will be transported separately by plane. Workers prepare the modules in Mexico and attach them to the screens before adding the cabinets.
The changes, which allow the company to rely more on planes than ships, will reduce overall production time from nine weeks to four, said Marco Esponda, general manager of human resources at Sharp's Rosarito Beach factories, which are known as Sharp Electronica Mexico S.A. de C.V., or SEMEX.
Sharp can then make quicker adjustments to local markets. If, for example, there is greater demand for 52-inch models, the company can save valuable time by flying more glass screens of that size for quick assembly in Mexico.
Mexico has been trying to encourage manufacturers to develop more high-tech operations there by touting itself as economically stable compared with other manufacturing areas around the world.
Rocio Ruiz, Mexico's assistant secretary of industry and commerce, said the country's inflation rate is at 3.8 percent, which she classified as "very manageable and very adequate for the macroeconomic conditions of our country."