It has emerged that Foxconn is interested in taking over the struggling LCD division of Japan’s Sharp. Foxconn is seeking Apple Inc. (NASDAQ:AAPL)’s hand in the deal, but there are also efforts to try to keep Sharp’s technology away from foreign hands by arranging for the buyout of embattled LCD business by a local company.
Reports indicate that Taiwan’s Foxconn has made a proposal to acquire a majority stake in Sharp’s LCD business. However, the details of the proposal have remained scant as it is currently unknown what value Foxconn is attaching to the LCD business in question. However, as of early this year, Sharp’s LCD division was valued at about $2.5 billion. The business posted consolidated sales of $7.5 billion in fiscal 2014.
Reports indicate that Foxconn is seeking the backing of Apple to acquire Sharp’s LCD division, which is battling competition and weak pricing environment. Apple has not commented on the rumors.
Unfavorable consolidation
Sharp’s LCD business makes displays for televisions and smartphones, and Apple Inc. (NASDAQ:AAPL) is one of its customers. As such, acquiring the business would enable Apple to among other thinks prevent unfavorable consolidations in Japan’s display industry.
Besides Foxconn, Sharp’s LCD business is also being eyed by a local firm. There are reports that Sharp has had talks with Japan’s Innovation Network Corporation, which is the largest shareholder in Japan Display, a rival of Sharp in LCD business.
If Sharp favors selling its LCD business to a local rival, the outcome could be undesirable for Apple. There is the risk of such consolidation narrowing Apple’s LCD supply options and also diluting its influence in LCD pricing.
Ownership of the LCD business
It is unclear how Foxconn and Apple Inc. (NASDAQ:AAPL) would share the ownership of Sharp’s LCD operation if they acquired it. However, it makes plenty of sense for Apple in LCD component sourcing.
In addition to acquiring Sharp’s LCD business, Foxconn is also said to be seeking to purchase a stake from Sharp in a display plant that the two companies operate jointly.
