Foxconn Shores Up Display Supplies

Hon Hai Precision Industry, parent of EMS provider {complink 2125|Foxconn Electronics Inc.} and a leading supplier to {complink 379|Apple Inc.}, is taking a 10 percent stake in {complink 4907|Sharp Electronics Corp.} in an effort to shore up a source of liquid crystal displays.

Sharp is one of three display makers, in addition to Korea's Samsung and LG, that are licensed to manufacture Apple's new Retina displays. Apple has been unable to meet demand for its new iPad because of a shortage in displays. So far, only {complink 4751|Samsung Electronics Co. Ltd.} has been able to produce the trademarked displays in volume.

Hon Hai/Foxconn will invest $808 million in Sharp, making it the top shareholder of the Japanese company.

Sharp, like other LCD makers, has been suffering from slowing demand of the displays and lower ASPs. Samsung has spun its LCD business off into a separate unit in order to focus on the development of OLEDs, a new, higher-profit panel technology.

Sharp's new president, Takashi Okuda, told The New York Times:

    We needed to take action, as we face a strong yen and a rapidly changing business environment. It’s no longer an option to do everything from development, design, manufacturing, marketing and customer service. It’s more important for us to collaborate with business partners to be competitive in the market.

Sharp, Sony, and Panasonic, Japan’s three main TV makers, expect to lose $17 billion this year, hit by competition from foreign rivals led by Samsung, according to the NYT.

Overall pricing for LCDs stabilized in February, according to market research firm IHS iSuppli. That stabilization means prices fell less rapidly than in prior months.

“The last four months have seen decreases averaging 0.5 percent — indicating the arrival of stability in a market that saw pricing contract by 3 to 4 percent per month from August to October of 2011 for large-sized panels, defined as those sized 10.x inches and larger,” IHS iSuppli reports.

8 comments on “Foxconn Shores Up Display Supplies

  1. elctrnx_lyf
    March 28, 2012

    Future of LCD makers in Japan looks more n more bleak because of the competeition from compaies in Korea and Taiwan. Recently even Toshibha, Sony and Hitachi together formed a new business unit to reduce the operational expenses and increase the profitability. 

  2. Eldredge
    March 28, 2012

    This seems like a good move for FoxConn – they need the source for displays, and Sharp needs the business.

  3. Barbara Jorgensen
    March 28, 2012

    electrynx: yes, the WSJ has an article today that concludes Japan is falling fast in terms of electronics. iSuppli has been running a series on Japan since the quake and none of the industries really stack up. I have no doubt Japan can turn the trend around, but it looks like it will take a long time and a lot of investment.

  4. bolaji ojo
    March 28, 2012

    It also represents a major shift in Japan and an opportunity for Foxconn to crack the huge Japanese outsourced manufacturing market. Japan has not embraced manufacturing outsourcing as much as US and European companies and this represents the sign its biggest electronics companies are ready now for this trip.

  5. Eldredge
    March 28, 2012

    @ Bolaji,

    I suspect the fallout from last years earthquake/tsunami will have more far-reaching impact than the obvious, initial challenges. It may change the entire supplier base and business strategies going forward.

  6. _hm
    March 28, 2012

    This is very good news. What will be response from Samsung and LG? It is very nice feeling to get such advanced displays from these vendors.


  7. ITempire
    March 29, 2012

    Besides being surprising, it is an opportunity for investors looking to invest in LCD manufacturing, that the demand for Apple's new iPad is unfulfilled and more suppliers are needed. However, reluctance to invest may be due to the reason that the percentage decrease in LCD prices over years has been threateningly high therefore it is a high-risk venture with less chances for long term stability. Stability in prices, as indicated in the blog, is likely to calm the anxiety however not for long. 

  8. Barbara Jorgensen
    March 29, 2012

    Good point about Foxconn breaking into the Japan market. That has traditionally been a market that hasn't outsourced very much. WIth LCDs becoming more of a commodity, it makes sense to see more outsourcing going on. I wonder how Japan/China cultures will blend, however. Or maybe it will be arm's length between Foxconn and Sharp?

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