Foxconn Counts on Apple’s Lineup With Sharp LCD Investment
Foxconn Group Counts on Apple’s Future Through Sharp Investment
Sharp Corp. via Bloomberg
Hon Hai Chairman Terry Gou
Sharp incoming CEO Takashi Okuda
Sharp Corp., the maker of Japan’s
first commercial TVs, is turning to Foxconn Technology Group (FOXCGZ) and
founder Terry Gou for a $1.6 billion investment to help turn
around a business heading for its worst loss in a century.
“The tie-up shows how bad things are for Sharp,” said
Edwin Merner, president of Tokyo-based Atlantis Investment
Research, which manages $300 million. “They are in trouble and
their very survival is at stake.”
Sharp predicted a loss of 290 billion yen ($3.49 billion)
for the fiscal year ending March 31 because of falling prices
for its Aquos TVs, a currency that reached a postwar high and a
tax charge. Japan’s largest maker of liquid-crystal-display
panels halved the output at its largest TV panel factory and
said demand for sets won’t rise in the 12 months from April 1.
Foxconn and Gou will invest 133 billion yen in Sharp and
its display unit as the Taiwan-based maker of Apple Inc. (AAPL)’s iPad
seeks a supply of flat panels to drive growth. Foxconn, which
also makes the iPhone, gets about 22 percent of its sales from
Apple, according to supply-chain data compiled by Bloomberg.
Foxconn, including Taipei-listed flagship Hon Hai Precision
Industry Co. (2317), will buy 9.9 percent of Sharp Corp. for 66.9
billion yen in a new-share sale, the Osaka-based company said in
a statement yesterday. Foxconn Chairman Gou and related
investment companies will buy 46.5 percent of Sharp Display
Products Corp., a venture with Sony Corp. (6758), for 66 billion yen.
‘Risky, Aggressive Move’
Yesterday’s deal, the largest Japanese investment by a
Taiwanese buyer, includes an agreement to purchase as much as 50
percent of Sharp (6753) Display’s LCD panels. Sharp (6753) may begin supplying
panels for Apple’s iPad next month, according to researcher IHS
“This is a risky and aggressive move by Foxconn, which is
betting on current and future Apple products, including the iPad
and an Apple television, a product which doesn’t even exist,”
said Vincent Chen, a Taipei-based analyst at Financial Holding
Co. who recommends investors buy Hon Hai. “Foxconn needs the
acquisition to get advanced display technology, which it
Sharp shares rose by the daily limit to close at 570 yen,
compared with 495 yen yesterday. Foxconn’s Hon Hai rose 4.6
percent to NT$113, the highest level in more than a year.
Foxconn entities will buy 121.65 million new shares in
Sharp for 550 yen each, according to Sharp’s statement. That is
11 percent more than yesterday’s closing price of 495 yen. Sharp
has declined 15 percent this year.
Credit-default swaps insuring the debt of Sharp against
default plunged 48 basis points yesterday to 222.9 basis points,
the lowest since March 7, according to prices from data provider
CMA. The swaps reached 296.5 basis points on March 22, the
highest in almost eight years, according to CMA, which is owned
by CME Group Inc. and compiles prices quoted by dealers in the
privately negotiated market.
Sharp (6753) has 20 billion yen of bonds maturing in June and
about 200 billion yen of convertible bonds maturing in September
2013, according to data compiled by Bloomberg.
“We needed to take action as we face a strong yen and a
rapidly changing business environment,” Takashi Okuda, who
becomes Sharp’s president on April 1, said at a press conference
“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.”
Sharp didn’t trade earlier today as buy orders outnumbered
sell offers by about 4-to-1.
Hon Hai yesterday reported record quarterly revenue and
profits, buoyed by sales of iPads and iPhones that surpassed
analyst expectations. Shipments of the new iPad, released this
month and made by Hon Hai, surpassed 3 million in the first
three days of release, Apple said.
Sharp will supply its advanced screen technology, called
IGZO, for the new iPad, while the Cupertino, California-based
company may release its own TV by year-end, Chen said. IGZO
displays are small- and medium-size high-performance panels
using oxide semiconductors.
Sharp will begin shipping displays using IGZO technology
for the new iPad next month, joining major supplier Samsung
Electronics Co. and LG Display Co., Englewood, Colorado-based
IHS said in a March 14 statement.
Sharp Display, which owns a plant in Sakai, Japan, that
makes panels for TVs, said last month it will halve output as
sales of screens to outside makers dropped. The factory doesn’t
yet make IGZO panels, Miyuki Nakayama, a Tokyo-based spokeswoman
for Sharp said yesterday.
This is the third display-related deal announced by Foxconn
companies in three years. Foxconn Technology Group formed Chimei
Innolux Corp. (3481) in 2010 after a three-way merger. That entity,
Taiwan’s largest display maker, may post its sixth consecutive
quarterly loss when it reports fourth-quarter earnings this
month, according to analysts’ estimates compiled by Bloomberg.
Chimei Innolux and the Sharp businesses will function
separately, Gou said in a video call broadcast at a Tokyo press
After the sale, Hon Hai and its wholly owned unit Foxconn
Far East Ltd. will hold 6.6 percent of Sharp, and Foxconn
Technology Co. (2354), a Taipei-listed maker of computer casings and
electronics, and its unit Q-Run Holdings Ltd. will own 3.3
percent, Simon Hsing, spokesman for Taipei-based Hon Hai said by
The sale of its Sharp Display Products shares will cut
Sharp’s stake in the venture with Sony to 46.5 percent. Sony,
which continues to hold 7 percent of the venture, said it may
require Sharp to buy that stake if the company sold its holding.
Japan’s largest consumer-electronics exporter said it won’t
make further investments in the venture.
Rating Investment Information Inc. cut Sharp’s credit
rating by two levels to A-, the fourth-lowest investment grade,
from A+ on March 8 because “it will likely take time for the
company to improve earnings capacity,” the Tokyo-based ratings
company said earlier this month.
To contact the reporters on this story:
Tim Culpan in Taipei at
Mariko Yasu in Tokyo at
To contact the editor responsible for this story:
Michael Tighe at