Foxconn becomes biggest Sharp shareholder. Eyes mobile for global dominance

The Hon Hai Group (better known to those of you in the ‘Western’ world as Foxconn) has entered a major partnership with Sharp Corporation of Japan, after more than nine months of negotiations.

Foxconn is best known for being the maker of Apple’s iPhones and iPads, but it also makes many other electronics. Sharp is a well known TV and display panel maker.

The agreement between the two companies has two parts. Firstly, Foxconn will take a 10% stake in Sharp, which will make it the single biggest Sharp shareholder.

Secondly, the Taiwanese company will also buy 46.5% of the shares in a flat panel joint-venture that Sharp has set up with Sony. Sharp will keep 46.5% of the shares as well, whereas Sony will be left with 7%, having an option to divest that to Sharp.

Additionally, Foxconn has committed to buying 50% of all of Sharp’s LCD panel output.

The entire thing will cost Hon Hai $1.6 billion. This is the largest ever investment made by a Taiwanese company in a Japanese company. The truth is that Sharp desperately needs the money in order to stay afloat. Which may be one of the reasons why this deal went through. Foxconn needs Sharp to stay alive, as it’s one if its biggest suppliers.

On the other hand, this does kind of give some credence to nascent rumors that claim that Apple is looking at Sharp (and Foxconn) for supplying the displays for its gadgets in the future. Right now the biggest supplier is Samsung, a company with which Apple is having a number of legal spats across the world. Foxconn is Apple’s biggest OEM, and the relations between those two companies have always been great, so it’s entirely plausible for Apple to source its displays from the company that also assembles its products. This is one more thing that Tim Cook’s current visit in China is rumored to be about.

Apple could be looking at Sharp and Foxconn for supplying panels for the oft-rumored Apple-branded television set, if that will ever turn out to be more than speculation made up out of thin air. However, Sharp’s focus in the short term will be on displays for mobile devices. That’s because there’s still a lot of room for growth in that space, whereas TVs aren’t selling as well as they once did, and margins in that industry are shrinking every day.

With Hon Hai being one of the largest mobile device OEMs, Sharp’s renewed focus on mobile displays as well as this investment and Foxconn’s commitment to buy 50% of Sharp’s display output do seem to make a lot of sense.

Via China Times

Author: Vlad Bobleanta

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