Battle of the Giants

trevor-galbraithThere is an epic battle taking place at the very top of our industry. Foxconn (Hon Hai Holdings) is negotiating hard to acquire the troubled Japanese consumer giant, Sharp Electronics for a reported $5.6 billion.

Sharp has had a very troubled history in recent years. Only six years ago it was the global number one in the manufacture of solar cells for the photovoltaic industry. Both its solar cell and solar battery businesses have been in freefall and severely damaged by the vagaries of the policy-driven pv industry.

However, the company does possess some unique and market-leading technologies in the smartphone LCD industry, including flexible OLED screen technology that would be extremely attractive to Apple and Samsung, among others.

Foxconn is negotiating hard to acquire the troubled Japanese consumer giant, Sharp Electronics for a reported $5.6 billion.

Not surprisingly, the Japanese government is reluctant to lose this technology to a foreign takeover and they are supporting a competing offer from Innovations Network Corporation of Japan (INCJ) to buy the assets of Sharp and combine them with Hitachi, Toshiba and SONY to form a wholly-Japanese owned rival to the Korean display giant LG Electronics.

As part of this consortium, Sharp’s creditors, Mizuho and Mitsubishi UFJ banks are to offer $2.5 billion in debt relief, but needless to say they are privately more attracted by the cash offer of Foxconn chairman, Terry Gou.

Foxconn, while playing their cards close to their chest, can see two major benefits to the deal. First, they acquire the market-leading LCD technology, helping secure their business with Apple and Samsung. Second, they acquire the Sharp consumer brand. This would enable Foxconn to leverage on the considerable technological capability it has amassed over the years as a contract manufacturer, to launch its own range of consumer products.

Terry Gou has given Sharp chairman, Kozo Takahashi until February 29th to accept his offer. No doubt the result will be known by the time you receive this magazine.

Trevor Galbraith Editor-in-Chief editor@globalsmt.net

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