Some 5,000 staff at Sharp are set to be axed after the company posted a quarterly net loss of ¥138.4bn (£1.13bn).
The consumer electronics vendor said "urgent action" needed to be taken to address the gravity of the situation as its sales plummeted by 28 per cent to ¥458.6bn in the three months to 30 June.
Restructuring charges of ¥14.2bn and an anti-cartel settlement package of ¥15.8bn relating to the TFT LCD business also contributed to the loss.
About one in 11 of the 57,000 worldwide employees of Sharp Corporation will be cut by March 2013 through compulsory and voluntary retirements and off-balance-sheet arrangements, Sharp said. No details were given on where the cuts will be made.
By sector, mobile phone sales suffered the biggest fall, recording a 69 per cent decrease due to supply shortages for key components causing production bottlenecks.
LCD TV sales fell by a half, and audiovisual and communications equipment sales were down 55 per cent, leading to an operating loss of ¥20.2bn compared with the same period last year.
The vendor said in a statement that although the situation is worse than expected, it hopes to return to profitability by the end of the year.
The statement said: "The current business environment represents an extremely challenging situation.
"Regrettably, the first quarter ended even lower than had been forecast. Sharp recognised the gravity of the situation and the need for urgent action.
"In order to return to profitability in the second half of fiscal 2012, Sharp is working to implement fundamental improvements in three areas in particular that weigh heavily on the company: inventory, plants and equipment, and personnel."
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