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 17.1 billion yen ($149 million) from 19.8 billion yen 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 Taiwan, South Korea 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 11.20 euros, the equivalent of 1,560 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.

Net income was dragged down as 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.

Seiko Epson, the world's second-biggest printer maker, said second-quarter profit tumbled 73 percent to 5.8 billion yen in the three months ended Sept. 30.

Sharp, which is forecasting a third year of record profit, is investing in factories to help increase production yield and bring out high-definition TVs as it aims to differentiate its products from cheaper models made by other Asian manufacturers.

The company is building the world's biggest LCD factory in Japan's Kameyama city, next to an existing panel plant. The eighth-generation factory, which will begin operations in October 2006, can handle glass substrates almost twice the size of a seventh-generation plant.

Sharp overtook NEC Corp. and Matsushita Electric Industrial Co. in mobile phones shipments in Japan for the six months ended Sept. 30, according to a report last week from market researcher MM Research Institute.

For its refrigerators, microwaves, air purifiers and other household goods business, operating profit dropped to 1.25 billion yen from 1.3 billion yen. Profit at its information electronics division, which include personal computers, calculators, color monitors and printers, rose 8 percent to 12.1 billion yen.

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