Hon Hai Precision Industry, the main supplier of Apple Inc, is in talks with Sharp Corp about increasing its stake as it bets on the Japanese firm’s leading edge technology to give it a boost in the cut-throat display panel business.
Sharp’s shares extended gains to over 6 percent after Hon Hai chair and founder Terry Gou told the company’s annual meeting in Taiwan on Monday that the talks come after a recent steep fall in Sharp’s share price.
Hon Hai agreed in March to buy new shares in Sharp worth $844 million as part of a tie-up in liquid crystal display production.
Gou also said he plans to list a Sharp LCD plant in Japan on the Taiwan stock exchange within three years, saying the plant’s advanced technology was better than that of arch-rival Samsung Electronics.
“I’m proud to say the cooperation with Sharp will let us beat Samsung in terms of clearness – high resolution,” Gou told shareholders.
“When we bought, Sharp’s shares were 550 yen, now it is 400 something. It’s been dragged by the macro environment. We have already sent delegates there to see if we can buy more shares.”
Gou took a 46.48 percent stake in Sharp’s loss-making Sakai LCD plant with his own money as part of the deal to buy into Sharp. He said on Monday its capacity would soon be used up, so he expected to inject more capital to expand it.
“I invested in the Sakai 10th generation plant in my own name because some investors were concerned about investing in panels, that it might not be a good business,” he said.
“The Sakai plant has an exclusive agreement with Corning on large panel supply; so our competitors won’t be able to secure any glass even if they want it.”
Losses at the underutilised Sakai facility resulting from a global oversupply of panels and weak demand left Sharp with a net loss of 376 billion yen ($4.73 billion) in the year ended March 31.
Sharp was hit hard last year by a glut in supplies of LCD panels and weak demand for TVs, prompting it to tie up with Hon Hai in a bid to utilise idle production capacity. The alliance is also an opportunity for Hon Hai to tap the manufacturing expertise of Japan’s leading panel maker.
For Hon Hai the alliance with Sharp could open the way for it to push for orders for Apple’s much-anticipated Apple TV.
Hon Hai shares ended up 2.37 percent in a broader market up 1.76 percent.