Apple supplier Hon Hai buying stake in Sharp
A new deal will see Hon Hai acquire more than 10 percent of Sharp and almost half of its LCD business, allowing the two companies to work together to make TVs.
Stung by huge losses and dwindling sales, Sharp Electronics is selling a chunk of itself to Hon Hai in a bid to raise cash and expand its LCD TV production.
Hon Hai will purchase about 11 percent of Sharp and 46.5 percent of the company's LCD TV factory in Sakai, Japan. Once the deal is done, the factory will be 46.5 percent owned by Sharp, the same amount by Hon Hai, and 7 percent owned by Sony. In return, Sharp will issue about $800 million in stock to Hon Hai, according to a New York Times report.
Sharp plans to use the money from the stock sale to invest in new LCD technology, not just for TVs but also for mobile gadgets, the Times report added. The company will work with Hon Hai's Foxconn unit to manufacture smartphones and other devices outfitted with LCD panels. Sharp is also expected to use Foxconn's factories as leverage to offer lower prices to its customers and ramp up products more quickly.
The company reportedly found itself unable to deliver the displays for the new iPad quickly enough, forcing Apple to rely solely on Samsung for the LCD panels, according to Bloomberg. A recent story from DigiTimes claims that Sharp started rolling out displays last month, while other reports say the company has yet to kick off initial shipments. Either way, Sharp was late to the iPad game.
Sharp has faced a difficult climate, with falling LCD TV prices and a rising yen both biting into sales and profitability. The company recently lowered its earnings forecast for fiscal 2011, which ends March 31,. At the same time, its new president, Takashi Okuda, is preparing to take over on April 1.
"Sharp can no longer handle everything on its own, from R&D to design, production, procurement, sales, and services. But in the competitive global market, Sharp's vertically integrated model has reached its limit," Okuda said, according to the Times.