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Foxconn, Sharp merge for LCD tech, manufacturing

Posted: 31 Mar 2016     Print Version  Bookmark and Share

Keywords:LCD  electronics  optoelectronics  LCD technology  manufacturing 

Taiwanese electronics contract manufacturer, Foxconn Technology, has finally gained control of Japanese major electronic brand, Sharp Corporation. Apple, Foxconn's biggest client, will incorporate Sharp's liquid crystal display (LCD) technology and manufacturing capacity, adding to its existing LCD holdings in Innolux Corporation, Taiwan's largest flat-screen maker.

The Taiwanese company will take a 66 per cent stake in Sharp through investments by its subsidiaries such as Hon Hai Precision Industry, Foxconn (Far East) Limited, and Foxconn Technology. The takeover will bring Foxconn a step closer to Chairman Terry Gou's dream of creating a company with a brand name and manufacturing scale on a par with South Korea's Samsung Electronics.

"I am thrilled by the prospects for this strategic alliance, and I look forward to working with everyone at Sharp," Gou said in a joint press statement with Sharp. "We have much that we want to achieve, and I am confident that we will unlock Sharp's true potential and together reach great heights."

Gou had been in talks with Sharp since 2012. [Read Deal or no deal? How Foxconn-Sharp benefit from reconciliation] Foxconn was close to an agreement a month ago, when Sharp's board chose Foxconn over a rival bid from Japan's state-backed Innovation Network Corp. After learning about Sharp's liabilities, Gou delayed the agreement until this week to negotiate a lower price.

Foxconn will pay ₹23,120 crore (389 billion yen or $3.5 billion) for the controlling stake in Sharp, 100 billion yen less than the agreement a month ago.

"I am pleased with our decision today to form a strategic alliance and merge both forces between Sharp and Foxconn to accelerate innovation with the creativity and entrepreneurial spirit of both our companies," Sharp CEO Kozo Takahashi said in the statement.

It will be the first merger of Taiwanese and Japanese electronics giants and their disparate corporate cultures. Sharp, which has been saddled with debt and has racked up chronic losses, will join Foxconn, a company that's known for its operational efficiency.

Sharp, which makes Aquos-brand LCD TVs, said that it expects an operating loss of ₹10,104 crore (170 billion yen) for the fiscal year ending on Thursday, reversing an earlier forecast for a profit of ₹594.35 crore (10 billion yen).

The LCD TV business has been unprofitable for major brands such as Samsung, Sony, and LG Electronics because of strong price competition from Chinese brands such as TCL and Hisense. Prices of large LCDs have plunged in recent years as a result of excess production from suppliers in China.

Foxconn, which started business as a manufacturer of plastic knobs for black-and-white TVs with a loan that founder Gou got from his mother, rapidly expanded in electronics by developing a patent portfolio in miniaturised connectors, giving the company an entry into business with virtually all of the world's major electronics brands.

The stake in Sharp will mark the first time for Foxconn to straddle contract manufacturing and a global electronics brand.

"We are committed to restoring profitability and strengthening operations to once again make Sharp a leader in the global electronics arena and a world-class company with a positive outlook," the companies said in the joint statement. "Both our teams are on the same page working towards the same goal."

The two companies are planning a formal event to announce the merger on April 2.

-Alan Patterson

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