Sharp
Corporate History & Strategy

Tokuji Hayakawa, a metalworking craftsman, personally founded his business in September 1912 (Taisho 1). Without a trade name, he made his living processing and selling independently developed metal products such as belt "buckles" and water tap fittings of his own design. In 1914, he relocated his home and workshop to Honjo, Tokyo (present-day Tachikawa, Sumida-ku, near Ryogoku Station), and introduced a 1-horsepower motor to improve production efficiency.

At the time of founding, the business was a small-scale metalworking operation without a specific flagship product, handling various metal products according to customer orders. While Hayakawa's skills as a craftsman were excellent, the business direction had yet to be established. The turning point for Hayakawa's business came from an external development request.

In 1915, a stationery manufacturer commissioned Hayakawa to develop and manufacture a "propelling pencil (mechanical pencil)." Hayakawa developed the "Hayakawa-type propelling pencil" with a proprietary mechanism. By applying metalworking technology to precision stationery components, he transformed from a contract processor to a manufacturer with its own products. During World War I, the company focused on overseas exports, and the mechanical pencil grew rapidly as its flagship business.

By 1923, the workforce had reached 200, and the company had developed into a manufacturer with a factory in Tokyo's Honjo district. The growth from a craftsman's sole proprietorship to a 200-person company in just 11 years was made possible by the establishment of the mechanical pencil as a proprietary product. The company's current name "Sharp" derives from this mechanical pencil.

On September 1, 1923, the Great Kanto Earthquake struck. While Tokuji Hayakawa survived, his wife and children perished in the ensuing fires. The factory, concentrated in Tokyo's Honjo district, was completely destroyed, and the manufacturing operation that had grown to 200 employees collapsed in an instant. The devastation simultaneously wiped out the business foundation built over 11 years and his family.

One month after the earthquake, in October, Nihon Bungu Seizo (a sales client) demanded repayment of outstanding loans. With the factory in total ruin, there was no prospect of repayment, and Hayakawa was forced to transfer the business itself to Nihon Bungu Seizo. In this process, the mechanical pencil patents were also transferred without compensation, meaning he relinquished both the intellectual property and royalty income from his flagship product.

In December 1923, Hayakawa relocated to Osaka and took on the role of providing technical guidance for mechanical pencil manufacturing at Nihon Bungu Seizo. Teaching technology at the very company to which he had transferred his business was a humiliating position for a former business owner, but at this point Hayakawa had no other options. The technical guidance contract expired in August 1924, and Hayakawa left Nihon Bungu Seizo.

Having lost all his business foundations in Tokyo, Hayakawa would rebuild his enterprise in Osaka. The catastrophic damage from the Great Kanto Earthquake ultimately relocated Hayakawa from Tokyo to Osaka, creating the geographical starting point for what would become Sharp, a Kansai-based electronics manufacturer. The history of Sharp, headquartered in Osaka rather than its founding city of Tokyo, was shaped by this earthquake.

Having lost everything in the Great Kanto Earthquake, Tokuji Hayakawa established Hayakawa Kinzoku Kogyosho (present-day Sharp) in Abeno-ku, Osaka in September 1924. At founding, the company handled processing and sales of metal parts for stationery, restarting in the same metalworking business as in the Tokyo era. However, the mechanical pencil patents had already been transferred to Nihon Bungu Seizo, and contract processing of metal parts alone offered limited growth potential.

The turning point came with the news that domestic radio broadcasting would begin in 1925. Hayakawa purchased two crystal radios imported from the United States, disassembled them, and studied their components. In April 1925, he succeeded in developing a crystal radio receiver—the first domestically produced crystal radio in Japan. This was the first step in a business transformation that applied metalworking technology to electrical products.

Hayakawa sold the crystal radio he developed under the "Sharp" brand. The price was set at 3.50 yen—half the cost of imported radios—and sales expanded on the strength of price competitiveness. Furthermore, since crystal radios had the technical limitation of restricted reception range, the company also began developing vacuum tube radios, which were becoming widespread overseas.

In 1929, a vacuum tube radio was launched. The sales price was set at one-tenth of imported products, and following crystal radios, the company expanded the market for vacuum tube radios as well. In 1934, the Hirano Plant was constructed, establishing a mass production system utilizing conveyor belts. By pursuing cost reduction, the company established the brand recognition of "Sharp means radios" in the prewar market.

The growth of the radio business transformed Hayakawa Kinzoku Kogyosho from a metalworking company into a radio manufacturer. In 1935, the company was reorganized as a corporation, and in 1936 the trade name was changed to Hayakawa Kinzoku Kogyo, followed by Hayakawa Denki Kogyo in 1942. The evolution of trade names itself reflects the process of the business's center of gravity shifting from metalworking to electrical products.

The trajectory of a founder who left Tokyo after the earthquake, restarted in Osaka, and transformed into an electronics manufacturer by capturing the new radio market shaped Sharp's character as a company. The business development pattern of pioneering markets through domestication of new technologies and low-price strategies—rather than extending existing businesses—would repeatedly appear in subsequent product lines including television, calculators, and LCD displays.

In anticipation of the start of television broadcasting in Japan from February 1953, Sharp signed a technical assistance agreement with U.S. RCA in 1952. Using the same approach as for radio domestication—introducing overseas advanced technology—the company rushed to commercialize television. One month before broadcasting began, a black-and-white television (14-inch) was launched at 175,000 yen, achieving the earliest entry into the television market among domestic electronics manufacturers. At the time, the starting salary for a high school graduate in government service was 5,400 yen, making television an extremely expensive product for ordinary households.

To solidify the first-mover advantage through mass production, the Tanabe Plant was constructed in 1954 exclusively for television production. Applying the conveyor belt mass production methods cultivated during the radio era, a production system of 20,000 units per month was established. By pursuing cost reduction through mass production, the company aimed to bring the price of television—a luxury item—down to an affordable range.

As the first entrant in domestic television, Sharp secured the No. 1 domestic share for 4 consecutive years from 1953 to 1956. Leveraging the distribution network and mass production technology built through radios, the company rapidly expanded sales in step with the spread of television broadcasting. In the new market of television, the speed of technology introduction and mass production capability created first-mover advantages.

However, market share stood at only 16.9% as of 1956, and as major electronics manufacturers such as Matsushita Electric and Hitachi entered television production in earnest, Sharp's first-mover advantage was rapidly eroded. The major manufacturers surpassed Sharp in the scale of their distribution networks and brand power, and low prices through mass production alone could not sustain competitive advantage. The pattern of pioneering a market through early entry only to lose leadership when major players entered in force would become a recurring theme in Sharp's business history.

In the early 1950s, Sharp had concentrated management resources on mass production investment for black-and-white television, falling behind in investment for white goods such as refrigerators and washing machines. From 1956 onward, as Matsushita Electric ramped up its mass production system, Sharp lost its No. 1 share in domestic television, and the limits of growth as a television-only manufacturer became apparent.

Furthermore, maintaining the retail stores that Sharp had been affiliating through television sales was also a challenge. Since television alone limited retail store revenues, maintaining affiliated stores was difficult without the ability to handle the full range of home appliances including refrigerators and washing machines. The dual challenge of declining competitiveness in the television market and maintaining the distribution network demanded a structural transformation of the business.

In 1957, Sharp formulated a management policy to "develop as a comprehensive home appliance manufacturer." The company built a system to sell the "three sacred treasures"—television, refrigerator, and washing machine—as a package through affiliated stores, aiming to transform from a television-only manufacturer to a comprehensive home appliance maker. This policy was a strategy to simultaneously achieve product lineup expansion and distribution network maintenance.

On the production side, the Hirano No. 2 Plant was constructed in 1957 to commence mass production of washing machines, followed by the Yao Plant (white goods) and Nara Plant (component production) in rapid succession in 1959. The rapid capital investment of launching three plants in just three years established the production foundation as a comprehensive home appliance manufacturer. This was the decision of a Sharp that had lost first-mover advantage in television to counter competition with major manufacturers through product diversification.

Sharp launched the calculator "QT-8D" in 1969 but struggled with LSI procurement from U.S. semiconductor manufacturers during development. Since calculator competitiveness was directly linked to semiconductor performance and cost, product differentiation and price competitiveness were difficult to achieve as long as the company relied on external procurement. The recognition spread among management that in-house production was inevitable to achieve stable semiconductor supply and optimization for the company's own products.

In March 1969, Sharp signed a technology alliance with U.S. semiconductor manufacturer Rockwell, planning to produce semiconductors in-house. However, Sharp had virtually no semiconductor manufacturing technology, and front-end process technology (circuit formation on wafers) required building from scratch. For a comprehensive home appliance manufacturer to embark on in-house semiconductor production was an exceptional decision at the time.

In 1970, instead of exhibiting at the Osaka Expo, Sharp constructed the "Sharp General Development Center" in Tenri, Nara Prefecture. The investment was approximately 7.5 billion yen, equivalent to roughly 70% of the then-paid-in capital of 10.5 billion yen—a massive capital investment. The General Development Center served simultaneously as both an R&D facility and a semiconductor mass production plant, with the first factory completed in 1970 and semiconductor production commencing.

Due to insufficient manufacturing technology, the company initially imported wafers with pre-burned circuits from Rockwell and started production with only back-end processes. In 1972, front-end process lines were brought online, establishing an integrated production system. In 1976, the second factory was completed, establishing a production capacity of one million units per month.

With semiconductor mass production on track, Sharp succeeded in disrupting calculator prices in the early 1970s. By manufacturing semiconductors in-house, component costs were drastically reduced, and the company gained the competitiveness to wage the "calculator wars" with Casio in the domestic market.

In-house semiconductor production went beyond calculators, fundamentally transforming Sharp's technological foundation. The semiconductor technology cultivated at the General Development Center was later applied to LCD display development, laying the groundwork for Sharp becoming known as "LCD Sharp." The 7.5 billion yen invested in R&D—even at the cost of skipping the Osaka Expo—became the starting point that transformed Sharp's business structure from an appliance assembler to a device manufacturer with in-house semiconductor capabilities.

In 1998, Katsuhiko Machida was appointed president of Sharp. Simultaneously with his appointment, he announced the management policy that "by 2005, all televisions produced domestically will adopt LCD," declaring a complete withdrawal from CRT televisions and concentrated investment in LCD televisions. At the time, three competing formats—OLED, plasma, and LCD—were vying to become the next-generation television standard, and which format would become mainstream was not yet determined within the industry.

Scaling up LCD televisions to larger sizes still had many unresolved technical challenges, and at the time of the announcement, even the feasibility was unclear. There were reportedly voices of bewilderment within Sharp itself. While other companies spread their investments across multiple formats, the decision to concentrate exclusively on LCD was a bet on the technological foundation that Sharp had accumulated through in-house semiconductor and LCD device production.

In 2001, Sharp launched the "AQUOS" brand as a full-scale LCD television. Three sizes—20V, 15V, and 13V—were introduced to pioneer the market for flat-panel televisions as replacements for CRT televisions. Internally, the company formulated the "LCD Big Bang Strategy," strengthening promotional activities at mass retailers to drive LCD television adoption.

During the three years from the LCD television declaration to the AQUOS launch, Sharp concentrated investment in scaling up LCD panels and establishing mass production technology. The establishment of a brand and market share through first-mover entry was a reproduction of the business pattern Sharp had repeated with radios and televisions. However, it was not anticipated at this point that this preemptive investment strategy would later lead to a management crisis due to massive capital investment burdens and changes in the market environment.