A new alliance against the industry’s number one Samsung forms in East Asia. The Hon-Hai group from Taiwan, better known under the name ‘Foxconn’, as the producer under contract of Apple’s iPhone and iPad, bought 10% of the Japanese electronic enterprise Sharp. The stock exchange reacted with a jump on the announcement of the new Sharp president Takashi Okuda, who is supposed to officially take over the lead of the company in the beginning of April. The stock price of Sharp rose 15%. Okuda announced that Sharp’s strategy will change. They had been trying to get along solo but the pressure from competition was too high.
A Japanese Malaise
Terry Gou, head of Hon-Hai-Group, said in a video message that this new connection will foster the strength of Sharp in developing flat screens. The idea is to form a global integration model, said Okuda. The expectation is to combine Sharp’s potential of developing innovative products with the growing competitive advantage of Taiwanese companies.
For Sharp, and for the entire Japanese electronics industry, the entry of the Taiwanese competitor means a break. Until the year 2000, Japanese electronics companies like Sharp floated on a wave of success. With the rise of Samsung and other South Korean competitors in the flat screen and smart phone market, the pressure increased for Japan’s electronic industry. Its domestic competitors: Sony and Panasonic intimidates Sharp – particularly due to its declining television segment – its highest loss in the 99 years of company history. A loss of 290$ billion yen (around 3 billion Euros) is expected at the end of the business year at the end of March. The stock lost already 26% in value this year, and many market observers wondered how Sharp would want to increase capital.
Old Love foreclosed
The advantages through the entry of Hon Hai for Sharp are obvious. Sharp will emit new stock worth 66,9 billion Yen. With the revenue from this stock emission the Japanese plan to increase the development of small displays, as they are needed on the booming smart phone market. With the same deal, the Taiwanese will take over half of the shares which Sharp holds on the construction for LCD-screens in west Japanese Sakai. The factory’s degree of capacity utilisation is low; Sharp suffers as Panasonic and Sony under massive over capacities, since the long booming television market decreased. In the future Hon Hai wants to use 50% of the capacity in Sakai. The deliveries to the company are supposed to begin at the end of the year. Also in the future they both plan to do common production, and development of new products, said Okuda. Furthermore, he said that he could show Hon Hai a way how to make more business with apple. A remaining share of 7% holds Sony in the factory in Sakai. Sony announced to back off from there.
In the industry, rumors claim that Apple indirectly had its fingers in the deal between Sharp and Hon Hai. The American company is interested in strengthening Sharp to create a counter-pole to Samsung. The South Korean company is, on the one hand in the field of smart phones the biggest competitor of Apple, but on the other hand, also a big supplier of Apple’s displays. Moreover, speculations are that Apple plans to enter the television segment. Nevertheless, Foxconn’s entry at Sharp is considered remarkable.