Japanese electronics giant Sharp Corp yesterday announced a ￥132.9 billion (US$1.6 billion) tie-up with Taiwan’s Hon Hai Precision Industry Co (鴻海精密) as part of an LCD panel tie-up as it looks to reverse recent losses.
Under the deal, Sharp would sell 121 million new shares for ￥66.9 billion to Hon Hai. In addition, Hon Hai chairman Terry Gou (郭台銘) and related investment corporations would buy 46.5 percent of Sharp’s display unit for ￥66 billion.
Hon Hai, parent company of manufacturing giant Foxconn Technology Group (富士康科技集團), which builds gadgets for Apple Inc, will own about 9.9 percent of Sharp after the sale, making it the Japanese firm’s biggest shareholder.
The Taiwanese firm will buy about half the LCD panels produced at the loss-making Sharp Display Products Corp, a venture with Sony Corp in Sakai, Sharp said, in a partnership aimed at creating stable demand for the panels.
“Our firm’s unique devices and technological strength, coupled with Hon Hai’s manufacturing strength and scale, should allow us to introduce attractive products and services in a timely fashion,” incoming Sharp president Takashi Okuda said in a statement.
Later, Okuda told a press briefing that “we wanted to go beyond national borders and seek opportunities to expand our business.”
Sharp, Japan’s largest maker of flat panels, last month forecast a record ￥290 billion loss for the year ending March 31 as TV prices dropped and the yen reached a post-World War II high.
“We needed to take action, as we face a strong yen and a rapidly changing business environment,” Okuda said. “It’s no longer an option to do everything from development, design, manufacturing, marketing and customer service. It’s more important for us to collaborate with business partners to be competitive in the market.”
Hon Hai entities will buy 121.65 million new shares in Sharp, according to the statement. Hon Hai Precision and fully owned unit Foxconn (Far East) Ltd will hold 6.6 percent of Sharp, while Foxconn Technology Co (鴻準), the Taipei-listed maker of computer casings and electronics, and its unit, Q-Run Holdings Ltd, will own 3.3 percent, Simon Hsing (邢治平), a spokesman for Taipei-based Hon Hai, said by phone.
The sale of its Sharp Display Products shares will cut Sharp’s stake in the venture with Sony to 46.5 percent. Sony will keep its 7 percent holding, the firm said.
Japan’s electronics giants have been bleeding red ink, partly due to their loss-making TV units as the strong yen makes their products more expensive overseas, while they face tough competition from rivals like Samsung Electronics Co.
Japanese firms were also hit by sluggish demand for TVs at home, after record sales last fiscal year due to a temporary subsidy as the nation shifted to digital terrestrial broadcasting from an analog system.
“It’s positive for Sharp,” said Mitsushige Akino, of Ichiyoshi Investment Management Co in Tokyo. “The company got a backup for its capital and the partnership will also make it easier for Sharp to expand in China and Taiwan.”