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Foxconn owner Hon Hai to buy stake in struggling Sharp | Foxconn owner Hon Hai to buy stake in struggling Sharp |
(about 6 hours later) | |
Hon Hai Group, the owner of Apple supplier Foxconn, is to invest 133bn yen ($1.6bn; £1bn) in the Japanese electronics maker Sharp. | Hon Hai Group, the owner of Apple supplier Foxconn, is to invest 133bn yen ($1.6bn; £1bn) in the Japanese electronics maker Sharp. |
The tie-up is designed to boost Sharp's LCD (liquid crystal display) business, which has been losing money. | The tie-up is designed to boost Sharp's LCD (liquid crystal display) business, which has been losing money. |
The deal comes as the company faces stiff competition from Chinese and Taiwanese companies. | The deal comes as the company faces stiff competition from Chinese and Taiwanese companies. |
Sharp has forecast a net loss of 290bn yen ($3.8bn; £2.2bn) for the year ending 31 March. | |
'Timely action' | |
"The market surrounding the electronics industry is becoming severe," Sharp said in a statement on Tuesday when the deal was announced. | "The market surrounding the electronics industry is becoming severe," Sharp said in a statement on Tuesday when the deal was announced. |
"We believe that timely action is necessary to tackle these changes in the market." | "We believe that timely action is necessary to tackle these changes in the market." |
Sharp said it plans to sell a 9.9% stake to Hon Hai Group for 66.9bn yen. | |
Hon Hai and its founder Terry Gou also plan to buy a 46.5% stake in Sharp Display Products, a joint venture between Sharp and Sony located at Sakai, for 66bn yen. | Hon Hai and its founder Terry Gou also plan to buy a 46.5% stake in Sharp Display Products, a joint venture between Sharp and Sony located at Sakai, for 66bn yen. |
Analysts said that this would benefit Sharp which has struggled with weaker demand for its LCD units. | |
"This is positive for Sharp as it will allow them to share the current deficit at the Sakai plant," said Kazuhara Miura from SMBC Nikko Securities in Tokyo. | |
Sharp said in its forecast in February that bigger-than-expected price declines in LCD colour televisions and solar cells, and the overall global economic slowdown, were putting pressure on earnings. | |
Sharp rises | |
Shares in Sharp rose 15.15% on the Tokyo Stock Exchange on Wednesday hitting a daily limit, after which the stock was suspended from trade. | |
The stake sale is expected to benefit both of the companies. | |
Sharp is expected to benefit from the cashflow and its manufacturing costs are likely to come down. | |
Hon Hai is likely to receive more contract manufacturing orders from Sharp. |
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