Why should Foxconn buy Sharp

Foxconn and Sharp versus Samsung

The electronics company Samsung, the market leader in the TV business, is headed for a bottleneck in LCD displays for televisions. Important suppliers such as Foxconn and Sharp terminate the cooperation.

A sharp rivalry is developing on the television market between the East Asian electronics companies Samsung Electronics and Hon Hai Precision Industry (Foxconn). The Taiwanese company Foxconn and its Japanese subsidiary Sharp have canceled the delivery of LCD displays for television sets to Samsung in the course of the coming year, as reported by Japanese and Korean media. For Samsung this is not easy to cope with. According to information from the business newspaper “Nikkei”, the Sakai plant alone, a joint venture between Hon Hai and Sharp, will deliver around 3 million to 4 million LCD panels in sizes 40 and 60 inches to Samsung this year. Last year, according to information from “Nikkei”, about 11% of the panels for Samsung's television production came from the Sakai plant and from Sharp.

Samsung, the market leader in the television business, is said to have turned to LG Display, an arch rival on the home market, in its need. The gap could also be filled by more supplies from Taiwanese companies, it is said. On request, Samsung and Sharp declined to comment on business relationships with individual companies. The reports were not based on any communication from you, Sharp noted.

For Hon Hai and Sharp, too, not having a major customer is a risk. "Nikkei" quoted a Sharp manager as saying that one is relatively confident that the orders placed will be offset by other customers or by using the panels themselves. Two reasons are given for the decision. On the one hand, no agreement was reached on the conditions, it is said. This indicates that Hon Hai is asking higher prices to improve the difficult earnings situation at the Sakai plant.

On the other hand, however, the decision serves as a signal for Hon Hai's and Sharp's larger television plans. Sharp plans to double its sales of LCD televisions to around 10 million units a year by 2018. The company is primarily targeting its home market of Japan, China and other Asian countries. Sharp had given up and sold its television business in America and Europe under financial pressure in recent years. It has not been decided whether Sharp will re-enter these markets or buy back the naming rights, said a spokesman.

Hon Hai had taken over Sharp that year and saved it from ruin. The Taiwanese company is one of the largest contract manufacturers in the electronics industry and, among other things, builds the iPhone for Apple. With Sharp, Hon Hai is aiming for a bigger role as an independent producer. Sharp declined to comment on reports that it would work with Hon Hai to build a large television production facility in China.