Foxconn gains controlling stake in Sharp after lengthy negotiations

Foxconn, a company best known in tech circles for manufacturing Apple's iPhone, has finalized its buyout of Japanese electronics company Sharp. The deal was finally inked after weeks of difficult negotiation, and marks the largest acquisition by a foreign company in Japan's tech industry.

Bloomberg reports the original plan was for Foxconn to buy Sharp for around $4.3 billion. However, after learning of Sharp's financial woes, Foxconn decided to reevaluate the deal. The company ended up paying about $3.5 billion for a 66% stake in Sharp. Yahoo says that in addition to the price of the acquisition, Foxconn is expected to shell out an additional $1.7 billion buying "preferred stock" from Sharp's main banks.

The revised agreement also includes a backup plan that would allow Foxconn to buy Sharp's display division should the buyout fall apart before October 5 of this year. Bloomberg speculates that Foxconn CEO Terry Gou wants the company to start selling its goods directly to consumers instead of serving as a manufacturer for other companies. Additionally, Yahoo guesses the buyout could give Foxconn some pricing leverage against Apple, who buys a good portion of its displays from Sharp.

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    • ronch
    • 4 years ago

    Once upon a time big Japanese names like Sony, Matsu$hita/National/Panasonic, Toshiba, Sanyo, Sharp, Hitachi, etc. all seemed untouchable, invincible. Now we see brands that have been on the rise for the last 10-15 years and other emerging brands today take center stage and push some of the former big brands over the edge. Sony also isn’t the big name that it once was, and former DRAM makers like Mitsubishi and NEC have exited the memory industry several years before NAND became the next big thing. In the world of technology, you either shape up or slip out. This happened not only in the electronics industry; we see it in Japan’s automobile industry as well; Nissan would’ve been dead today or in much worse shape if it weren’t for Renault and Carlos Ghosn, and Mitsubishi Motors is feeling a bit desperate these days. Even Suzuki and Isuzu have left the U.S. while Hyundai and Kia are pretty strong.

      • blastdoor
      • 4 years ago

      The Japanese have been hurt by deflation and a strong yen. I think that’s the biggest problem.

    • albundy
    • 4 years ago

    isnt it already made in china? it cant go any lower than that!

    • Deanjo
    • 4 years ago

    [quote<]Bloomberg speculates that Foxconn CEO Terry Gou wants the company to start selling its goods directly to consumers instead of serving as a manufacturer for other companies.[/quote<] Again?

      • xand
      • 4 years ago

      Foxconn is not a direct-to-consumer brand – Sharp is.

        • the
        • 4 years ago

        Foxconn does sell motherboards to consumers though they have really scaled back their operations in the past couple of years. Granted that isn’t as main stream as TVs but it is a product sold directly to end users.

        • blastdoor
        • 4 years ago

        “From Sharp minds come Sharp products.”

        Good slogan — they should bring it back.

    • blastdoor
    • 4 years ago

    [quote<]Yahoo guesses the buyout could give Foxconn some pricing leverage against Apple[/quote<] I don't follow the logic of that guess. How does Foxconn owning Sharp allow Foxconn to charge Apple a higher price for anything? Perhaps owning Sharp might result in some small cost savings for Foxconn when assembling Apple products that use Sharp displays, though, which could boost Foxconn's profits. But I don't see how Foxconn can charge Apple a higher price for anything just because they own Sharp.

      • Deanjo
      • 4 years ago

      If anything it may actually give Apple a discount for purchasing additional product from Foxxcon.

      • Pitabred
      • 4 years ago

      Charging a fee to use displays other than their in-house ones, unless they don’t have the capacity? I could see it being pretty significant leverage.

        • iBend
        • 4 years ago

        they can do that.. it wont hurt Apple’s profit
        but that rule will have bad impact for other company who use foxconn assembly line, just like xiaomi, meizu, and others since they may want to use Samsung’s SAMOLED, and their profit margin already tiny enough

      • ludi
      • 4 years ago

      I think your second paragraph is a pretty close to the intended meaning; if Foxconn can lower its total cost of production by having display production in-house, it will have more margin to play with when negotiating with Apple on per-unit prices. That gives it an advantage over potential competitors who would have to accept, and integrate, third-party sourced displays.

        • blastdoor
        • 4 years ago

        So it’s not really pricing leverage against Apple; it’s pricing leverage against competitors like Pegatron.

      • Pwnstar
      • 4 years ago

      Foxconn isn’t raising prices, they are simply directing revenue that would have gone to Sharp to themselves instead.

      • the
      • 4 years ago

      Pricing leverage would necessitate a higher price for an individual part but rather it gives Foxconn/Sharp the means to get more of their parts into a product. For example, if Apple were looking at Sharp for just the display in a future product, that information would get to Foxconn management to be able to put in a bid for that products motherboard even though Apple initially didn’t ask Foxconn for a quote. Essentially the hope here is that the left hand will know what the right hand is doing.

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