OSAKA -- Sharp and Taiwan's Hon Hai Precision Industry are considering a new U.S. factory making large-format display panels suitable for televisions, a move that could reap political benefits but also pose some risks.

The Japanese electronics maker and its parent, better known as Foxconn, could sink more than 800 billion yen ($7.3 billion) into a plant featuring so-called generation 10.5 liquid crystal display panel production technology, which is used to make panels for television screens of 65 inches or more. The facility is expected eventually to turn out panels for the ultrahigh-definition "8K" TVs that Sharp plans to debut in 2018.

Sharp and Foxconn are already building a generation 10.5 plant in Guangzhou, China, that will be able to produce as many as 90,000 panels per month, targeting mass production in 2019. Sakai Display Products, a joint venture of the pair, already makes large panels in Japan, and adding a U.S. plant will give the duo a third hub for their global production network.

The companies are already planning to build a "sixth-generation" factory in the U.S. making panels for such devices as smartphones and automotive electronics systems. This plant will be capable of producing up to 60,000 panels or so a month, roughly double the capacity of Sharp's main plant for such panels in Japan.

Several American states are vying for these plants, with governors and other officials visiting Sharp's headquarters in early June. Sharp and Foxconn plan to take the support and incentives various states are offering into account when deciding where the facilities will go.

Michigan is a top contender for the smaller-panel plant, as American automakers, headquartered in and around Detroit, could buy many of the screens made there. Other Midwestern states, including Wisconsin, are in the running for the plant making larger panels. Sharp and Foxconn look to finalize their plans by fall.

Political advantage

Opening American plants is in part a move to get in the Donald Trump administration's good graces. Bringing manufacturing work back to the U.S. was a key part of the president's campaign platform. Sharp and Foxconn's chiefs visited Trump at the end of April to seek his support for the projects, which would bring new jobs, handing the administration a win. Making panels in the U.S. would also protect the Asian duo from import tariffs the president has threatened.

But the worsening scandal surrounding ties between Russia and Trump's campaign and associates could hobble the administration, preventing it from following through on either pledges of support or the threat of tariffs. The companies could need to rethink their global manufacturing strategy if the logic for locating plants in America disappears.

Ensuring these plants are profitable could be a challenge in any event. There is little industrial base to support LCD panel production in the U.S. currently, meaning Sharp and Foxconn would need to convince partners such as parts suppliers to join them in their American foray.

Market conditions could also turn against the pair. Currently, a combination of robust big-screen TV demand and tight supply of large panels following LCD line closures by South Korea's Samsung Electronics has prices riding high. But producers like China's BOE Technology Group are building panel factories of their own, and the large-panel market could soon soften.

New televisions from South Korea's LG Electronics and Japanese firms such as Panasonic and Sony incorporating organic light-emitting diode panels could also begin to supplant LCD models. While Sharp's 8K TVs aim to compete with these lines, a wholesale shift to the new technology could put the Japanese maker in a tough position.

(Nikkei)