Oct. 26 (Bloomberg) -- Sharp Corp., the world's biggest maker of liquid-crystal display televisions, had an unexpected drop in fiscal second-quarter profit as flat-screen TV prices fell and earnings slumped at its semiconductor business.

Profit in the three months ended Sept. 30 fell 14 percent to 17.1 billion yen ($149 million) from a year earlier. Bloomberg calculated the results by subtracting first-quarter numbers from the first-half earnings data released today by the Osaka-based company. Prices of its Aquos-brand LCD TVs fell about 20 percent in the first half, according to the company.

Sharp's profit decline and losses reported today by NEC Electronics Corp. and Seiko Epson Corp. highlight the difficulty Japanese electronics companies face competing with lower-cost rivals in South Korea, Taiwan and China. Sony Corp. will probably report a drop in earnings tomorrow and Pioneer Corp. and Sanyo Electric Co. widened loss forecasts in the past month.

Shares of Sharp slumped after the results were released, ending the day down 0.8 percent at 1,592 yen. They reversed a gain of 0.5 percent in the final two minutes of trading and the company's Frankfurt-traded stock recently traded at 11.30 euros, the equivalent of 1,574 yen.

Sales in the quarter rose 9.7 percent to 719.2 billion yen for the quarter. Operating profit, or sales minus the cost of goods sold and administrative expenses, fell 6.4 percent to 39.5 billion yen.

For the six months ended Sept. 30, the cost of goods sold rose in the six months to 77.6 percent of sales, compared with 77.1 percent a year earlier, indicating material costs are rising, the statement showed.

NEC Electronics, Japan's third-largest chipmaker, today said President Kaoru Tosaka will step down after the company reported a 1.55 billion yen second-quarter loss and forecast a deficit for the full year because of slumping chip sales. Seiko Epson, the world's second-biggest printer maker, said second-quarter profit tumbled 73 percent to 5.8 billion yen.

Sharp today said its fiscal first-half profit dropped 7.2 percent to 36.5 billion yen, due partly to an earnings slide in its chips business. The company's sales rose 6.2 percent to 1.34 trillion yen, while operating profit fell 3.2 percent to 75.1 billion yen from a year earlier.

Operating profit for flash memory chips used in mobile phones, image sensors used in cameras, and other semiconductors slid 48 percent to 4.52 billion yen. The business accounted for 6 percent of operating profit, and was the only division besides household electronics where profit fell.

Flash memory chip sales dropped 28 percent to 27.7 billion yen in the first half, as prices dropped about 30 percent, according to Hiroshi Saji, a senior executive vice president, at a Tokyo press conference.

For its LCD TV business, Sharp is focusing on making larger- screen TVs and high-definition sets to raise profit margins as competitors such as Samsung Electronics Co. and Sichuan Changhong Electric Co., China's second-biggest television maker, offer cheaper models.

The industry's average selling price for LCDs in the second quarter was about $180 for a 17-inch screen, while a 32-inch LCD module cost about $760, making it more profitable on a per-inch basis, according to DisplaySearch.

Sharp's shipments of LCD televisions rose 40 percent to 184.6 billion yen in the six months, and gained 56 percent by volume, according to Sharp's Saji. Sales slumped for small and mid-sized LCDs used in mobile phones, digital cameras and other consumer electronics, he said.

Sharp is building the world's biggest LCD factory in Japan's Kameyama city, next to an existing plant. The new eighth- generation factory, which begins operations in October 2006, will handle glass about 25 percent bigger than the size of a seventh- generation plant.

Elsewhere, operating profit at its LCD-making business gained 4 percent to 31.1 billion yen in the six months ended Sept. 30. Its audio-visual and communication equipment division, which include televisions, DVD players, and mobile phones, reported operating profit rose 6.6 percent to 16.2 billion yen.

Sharp raised its full-year forecast for mobile phone sales to 420 billion yen, from an earlier 410 billion yen estimate, as it introduced new models that have high-speed Internet connection. The company overtook NEC Corp. and Matsushita Electric Industrial Co. in handset shipments in Japan in the first half, according to market researcher MM Research Institute.

Profit for personal computers, calculators and printers, rose 8 percent to 12.1 billion yen, and while refrigerators, microwaves, air purifiers and other household goods dropped 3.5 percent to 1.25 billion yen. Sales of solar cells, which Sharp is the world's biggest maker, rose 41 percent to 74.2 billion yen in the half, according to the company.

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