Foxconn buys big stake in Sharp

Taiwanese manufacturer to buy 10 percent stake in Sharp for over US$800 million--becoming its biggest shareholder--in partnership to revive Japanese firm's declining TV display business.

Taiwanese manufacturer Hon Hai Precision Industry, better known by its trading name Foxconn, will become Sharp's largest shareholder with about 10 percent ownership, after buying 66.5 billion yen (US$800 million) worth of new shares from the ailing Japanese electronics giant, reports say.

Sharp announced in a press statement Tuesday that Hon Hai, along with its other three company units--Foxconn Technology, Foxconn (Far East) and Q-Run Holdings--will be issued around 121.65 million new shares, for an altogether 9.88 percent stake.

"The market surrounding electronics industry is becoming severe, with rapid price decline due to the development of digital technology and increasing competition in a global market. We believe the timely action is necessary to tackle these changes in the market," it said in the statement.

The company added that besides issuing new shares to the Hon Hai group, it is also establishing a strategic global partnership with it to collaborate in various business fields.

The press announcement did not state financial details, but The New York Times (NYT) estimated that Sharp will sell the new shares to Foxconn for 66.5 billion yen (US$800 million). With nearly 10 percent ownership, Foxconn will collectively be the largest shareholder in Sharp, it noted.

Foxconn will also acquire about half, or 46.5 percent, of the Sharp's 92.96 percent stake in its LCD (liquid crystal display) factory in western Japan, it said. 

Sharp's incoming president, Takashi Okuda, who will take office Apr. 1, said Sharp's "vertically integrated model has reached its limit" in the globally competitive market, and it can "no longer handle everything on its own". Sharp will use the funds from the shares issued to Foxconn to invest in new liquid-crystal-display technology, as well as LCD panels for mobile devices, where it expects robust demand, Okuda said during a news conference in Tokyo.

The two companies also plan to jointly develop and produce a wide range of gadgets, including smartphones, he added.

"Sharp is one of the most recognized brands worldwide and is also the leader in R&D," Foxconn chairman, Terry Gou, told reporters in Tokyo via a video message, NYT reported. "This is truly a winning alliance."

Sharp, along with other Japanese electronic titans Panasonic and Sony, are estimating a combined loss of US$17 billion in 2012, amid intense competition from foreign rivals including those from China and South Korea.

The Wall Street Journal said Sharp expects to post its biggest annual loss of 290 billion yen (US$3.5 billion) in this fiscal year, which also happens to be the 100th anniversary of its founding. Both Foxconn and Sharp had been mulling plans of a possible partnership since June last year, it added.