Sharp Inks Foxconn Deal To Rescue Diving Profits

Sharp has announced a deal with Foxconn parent Hon Hai Production that will see the Japanese company increase its use of third-party components, while Hon Hai takes shares in its new partner's LCD business. Described by Sharp as a necessary step given the continuing price slump in the electronics business, stronger global competition, and a response to environmental changes, the deal will see Hon Hai grab 50-percent of the Japanese firm's holding in the Sakai LCD plant.

That facility already has Sony as a minority shareholder, with 7-percent. After the deal is completed, Foxconn and Sharp will each hold 46.5-percent, something Sharp describes as being essential to "realize stable operation" there.

Meanwhile, a new "global level" alliance will help Sharp be more cost-competitive with rivals, using Hon Hai's production heft to get products to market quicker and more cheaply. The two firms will work together on other R&D research work and expects cooperation to expand in time, though no specifics are given.

Sharp desperately needs to reduce its expenditure and increase profitability, facing ever-increasing competition from low-cost Korean and Chinese firms. The company revealed an 18.3-percent net loss in net sales for the nine month period ending December 2011, translating to a huge 86.3-percent drop in operating income. Net income was a loss of around $2.5bn.