An article in the Wall Street Journal (March 29, 2012) describes a collapse in Sony’s interest in Sharp’s Sakai plant, whose production of high end LCD displays was expected to decrease costs for Sony, and garnered a 7 % investment from Sony. But when demands for TV sets increased due to a Japanese government incentive to switch to digital broadcsts, Sharp’s low yields prevented a reliable supply. But by the time yields increased, prices of LCD panels from other suppliers crashed, thus diminishing Sony’s interest in the plant. The result – Sony now feels it should get out of any further investments and sell its stake. Is this a case of a supply option that got undone by low yields at the plant ? Will the resulting observed risk and thus need by Sharp to to sell a stake to a Chinese manufacturer, Hon Hai, increase retail pressure on Sony ? How should capacity investments be structured to anticipate possible yield risk ?