Foxconn still in negotiations for Sharp stake, despite Samsung deal

Foxconn said it received prior notificaiton of Sharp's deal with Samsung

Taiwan's Foxconn Technology Group said it was still negotiating a deal for greater cooperation with Sharp, despite the Japanese display maker securing a US$110 million investment to supply LCD panels to rival Samsung Electronics.

Sharp's agreement with Samsung was no surprise to Foxconn, which had received prior notification of it, said the company's parent Hon Hai Precision Industry in a statement on Wednesday. "We thank Sharp for treating our bilateral relations with respect," it added.

The company declined to comment on the Samsung deal itself, but said talks to deepen relations between Foxconn and Sharp continue. It added that a deal made last year for Foxconn and Sharp to operate a factory together in Japan is producing "fruitful results."

The Taiwanese manufacturing giant, best known as the assembler of Apple's iPhone, was expected to secure a 10 percent stake in Sharp last year for $800 million. But so far, the two companies have failed to reach an agreement after Sharp saw its stock price plummet as a result of its ongoing financial woes.

On Wednesday, however, Samsung said it would buy a 3 percent stake in Sharp. In return, the Japanese display maker will provide a long-term and stable supply of LCD panels for TVs, mobile devices, and notebook computers.

Both Samsung and Foxconn compete in the TV market, with the Taiwanese manufacturer assembling the products for Sony, Toshiba and Sharp's Vizio line. The two companies are eager to partner with Sharp because of its cutting-edge display technologies, along with its manufacturing capacity, said Annabelle Hsu, an analyst with research firm IDC.

The Japanese company has its IGZO (Indium Gallium Zinc Oxide) technology, which can produce displays with a higher resolution than traditional LCD panels. Sharp also possesses production lines to manufacture displays at cheaper costs, resulting in lower prices for their TVs, Hsu said. For example, the company's 60-inch Vizio television sets are selling particularly well in North America due to the product's price of between $950 and $1,000, she added.

"Samsung couldn't really compete with those prices," Hsu said. "Samsung is facing a lot of pressure, so they are looking for the right technology."

Samsung's stake in Sharp, however, is relatively small and gives it no control over the Japanese firm. Foxconn, on the other hand, was said to want influence over Sharp's business decisions as part of its plan to buy a 10 percent stake, according to analysts.

"(Foxconn's) strength is on manufacturing low-cost products, but Sharp has a focus on high technology. So their corporate strategies are totally different," Hsu said. "I think Sharp is considering wanting other vendors to invest in them, and not just Foxconn."

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Tags business issuessamsungsharpFoxconn Technology GroupComponentsinvestmentsdisplaysMergers and acquisitions

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Michael Kan

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