Hon Hai Precision Industry, the parent company of Foxconn Electronics and one of the world's largest electronics manufacturers, will acquire a stake of almost 10 percent in Japanese consumer electronics maker Sharp, and almost half of its LCD panel subsidiary Sharp Display Products, in a deal announced Tuesday.
Hon Hai will invest ¥66.9 billion (US$806 million) in the deal, providing it with access to Sharp's manufacturing prowess in large LCD panels, where it is among the world's leaders. Hon Hai will also take a major share and jointly operate one of Sharp's key LCD factories in Sakai, central Japan, giving it access to up to half the panels produced there.
Sharp banked heavily on manufacturing such panels, best suited for large-screen TVs, but has lagged in producing screens for the booming smartphone and tablet market. Along with other Japanese electronics manufactures such as Sony and Panasonic, the company is facing heavy losses and struggling to turn its business around. Sharp said in February it expects to lose ¥290 billion in the current fiscal year, which ends this month, and recently announced a major leadership shakeup.
Sharp said timely action is necessary to tackle rapid price declines and increasing competition in the digital technology market.
With the added display demand from Hon Hai, Sharp will be able to ramp up production and lower per-unit costs at its facilities, which media reports say it had greatly reduced in recent months as demand faltered.
Sharp said it plans to use Hon Hai's investment to strengthen its production facilities for producing mobile LCD screens and developing new LCD technologies.
The deal is the latest sign of Japan's fading dominance in the global home electronics industry. The prices and profit margins its manufacturing prowess once commanded have been driven down by the rise of large manufacturers that build products for other brands: Foxconn's clients include Apple, Hewlett-Packard, Sony and Nintendo.
Join the CIO Australia group on LinkedIn. The group is open to CIOs, IT Directors, COOs, CTOs and senior IT managers.