Foxconn TV: Watch This Space

At the very least, Foxconn's recent investment in {complink 4907|Sharp Electronics Corp.} is a major step in its strategy to secure a supply of the most important component in today’s consumer electronics: the LCD panel. Some in the technology industry see the move as a strong indication that {complink 379|Apple Inc.} will bring a TV to market soon.

On March 27, Sharp announced that it would sell Foxconn a 10 percent share of the company and a 46.5 percent stake in Sharp’s 10th-generation LCD fab, which makes 60-inch panels. Foxconn agreed to buy 50 percent of the production from that fab, and Sharp agreed to outsource more of its TV OEM business to the company.

{complink 2125|Foxconn Electronics Inc.}, which also goes by the name Hon Hai Precision Industry Co. Ltd., is the largest EMS in the world and manufactures many of Apple’s products, including the iPhone and iPad. It is also becoming a major ODM for TV makers. Just two years ago, it made a huge investment in the LCD market. It spent more than $5 billion on a complex merger that combined Innolux, Chi Mei Optoelectronics, and TPO Displays Corp. to form ChiMei Innolux (CMI), the third-largest LCD maker. By securing its own supply of panels, which account for 70 percent of an LCD TV’s cost and 90 percent of its display performance, Hon Hai made itself a one-stop shop for TV makers.

The Sharp investment fills a couple of gaps in Hon Hai’s LCD supply chain. First, the 10 percent share presumably gives it better access to 9.7-inch panels for the iPad 3, says Sweta Dash, an IHS {complink 7427|IHS iSuppli} analyst. Though CMI supplied some of the panels for Apple’s iPad 2, the majority came from Samsung and LG Display. (Dash estimates CMI supplied only about 6 percent.) For the new iPad, CMI was dropped altogether as a supplier and replaced by Sharp.

Also, the investment gives Hon Hai access to panels for large-screen TVs. Through CMI, Hon Hai already has supplies of nearly all panels except the very largest (60 inches and larger). Dash calls Sharp’s 10th-generation fab the only facility capable of making such panels efficiently. By becoming a joint owner of the fab (Sharp owns 46.5 percent, and Sony owns the rest), Hon Hai is securing access to large panels, and it is probably getting a technology transfer that will help with its own LCD development.

“Besides the Gen 10 capacity, it’s possible that Sharp will transfer other technologies to Foxconn, including the high resolution low temperature polysilicon (LTPS), oxide TFT, color filter and advanced processes,” David Hsieh, vice president of the greater China market for DisplaySearch, wrote in a blog post. “Foxconn is currently building a Gen 6 LTPS fab in China for high resolution mobile phone panels, and may require more technical support from Sharp.”

According to IHS iSuppli, the need to lower costs and improve efficiency is driving more TV companies to outsource manufacturing, and Hon Hai is undoubtedly trying to position itself to capture as much of that business as possible. The company already builds Sony TVs, having bought that company’s Mexican and Slovakian TV assembly plants in 2009 and 2010.

In addition, the Sharp deal has industry watchers speculating that Hon Hai is preparing to manufacture a TV for Apple.

“We expect Apple to debut the iTV by the end of this year, and it is likely to adopt Sharp’s 10th generation TFT production line to produce TFT LCDs for iTVs,” according to a Daiwa Capital Markets report quoted in a BusinessWeek article. “We believe Hon Hai will have better vertical integration for the Apple iTV following its stake acquisition in Sharp’s plant.”

10 comments on “Foxconn TV: Watch This Space

  1. Nemos
    March 30, 2012

    “that Apple Inc. (Nasdaq: AAPL) will bring a TV to market soon.” Αnd if this became true, I think it will be a successful move for Apple. Maybe is the right move at the proper time for Apple.

  2. ahdand
    March 31, 2012

    Yes I also feel the same. I think its a good move if Apple takes it so they can diversify their market towards other segments as well.

  3. prabhakar_deosthali
    March 31, 2012

    A true internet smart TV may be in the pipeline  and Foxconn with Apple partneship must be contemplating to have a captive LCD supply for this product.

  4. Taimoor Zubar
    March 31, 2012

    Wow. I'm actually shocked to hear that Apple might come up with it's own TV. Given the move towards IP TV, this may not be the smartest decision. However, considering Apple's ability to come up with unique features, we can expect something that's much more than traditional TV. Really excited to see how the product turns out to be when they launch it.

  5. _hm
    March 31, 2012

    Will it be agian retina type of display with 4K+ resolution and 3D without glssses? All internet TV features will be bouns.


  6. Barbara Jorgensen
    April 2, 2012

    @Rich: I believe the Apple system is like a cable box that you hook up to get Internet television. I think what Tam is talking about is the manufacture of a TV set, rather than a TV protocol. I had the same question about Intel TV, and from what I can tell, the systems (cable boxes) basically don't require you to hook your PC up to the TV for Internet content. But I believe the content has to come from providers, and that means a fee. For instance, I'm sure you can download from the iStore with Apple TV.

    I don't know if the current system interfaces with the iPod/iPad. I would imagine it does. I'll see what I can find out.

    Getting into LCD manufacturing means Foxconn/Hon Hai is getting into the sets. If Apple made a TV set with all the electronics embedded (lose the cable box) I could see the appeal.

  7. Eldredge
    April 3, 2012

    I could see the appeal as well. Right now, the area behind my TV is a rats nest of wires connecting components together, including cables that are sittiing there for the convenience of connnecting to my laptop when desired.

  8. stochastic excursion
    April 3, 2012

    Connection with iStore would definitely make sense for Apple.  An “onDemand” type of user experience that minimizes desktop interaction would put internet TV in a league with cable and broadcast, and no doubt Apple wants to be in the forefront of that.

  9. t.alex
    April 4, 2012

    But do we know what kinda display Apple will use for TV? that can be a critical factor to choose or not to choose Foxconn.

  10. ahdand
    August 10, 2012

    Well Apple has been innovative all the time I think this time too it will be something revolutionary.

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