14 DAY TRIAL // Foxconn is currently the world's largest electronics manufacturer, being by far the largest employer in China, and has contracts with many major clients like Apple, Nokia, Sony and Microsoft. To expand its supply of low-cost screens to its customers, the company has decided to buy Sharp's LCD business.
This happens in a major effort to help companies like Microsoft and Apple maintain competitive prices while also keeping their manufacturing prices for products like tablets low.
This move comes as a fortunate win-win situation for both Foxconn and its customers, as the Taiwanese company expands its business while also providing low-cost display solutions for its clients. Sharp seems to have been losing money for several years and offloading its display business could bring the company back to profitability.
According to DigiTimes, Foxconn intends to call on Apple to contribute with funds on buying the large stake in Sharp's LCD business. Additionally, it seems Foxconn and Sharp are already producing displays in Sakai, Japan. The Taiwanese company plans to buy Sharp's 38 percent stake in the joint venture while acquiring other display production operations from Sharp.
Sharp's manufacturing assets become extremely valuable when Apple is involved
Apple's involvement might be justified since the American company uses Sharp screens for various devices, including iPad tablets. For instance, the latest iPad Pro uses Sharp's IGZO display, so it would make sense to have the display business closer to its traditional hardware supplier, Foxconn.
Still, this wouldn't necessarily mean a good thing from a financial perspective, since Foxconn may increase the screen prices at any moment as it doesn't struggle financially the way Sharp does.
However, the good traditional relationship between the two major companies would probably prevent this from happening. However, Sharp also plans to sell its LCD business to public-private Innovation Network of Japan that is a main shareholder in Sharp's main rival Japan Display.
If the talks succeed, Sharp's LCD business will be merged with Japan Display and the display prices will suddenly spike and Apple would have to pay more for its IGZO displays.
Sharp has received a loan of JPY200 billion (USD1.68 billion) from various banks to continue its display business, so we won't seeing an impending Foxconn acquisition just yet.