Foxconn, the Taiwanese company that manufacturers the vast majority of the worlds iPhones, have bid roughly $5.3 billion to buy Sharp, the struggling pioneer of LCD technology, the Wall Street Journal reports.
Foxconn is a Goliath. It’s the world’s largest electronics contractor manufacturer, and assembles products for the likes of Sony, Microsoft, and most famously, Apple. It’s also been subject to some less favorable headlines, thanks to controversies regarding employee working conditions.
On the other side, the Osaka-based Sharp have fallen from grace. Once a powerhouse in consumer electronics, Sharp was a major producer of screens for smartphones, tablets, and televisions. It’s now had two bailouts in the previous three years, with the most recent reportedly in the region of $1.7 billion, BBC News reports. In 2015, Sharp said it had recorded “large deficits for the year” thanks in part to a “lack of foresight in market changes” and a deterioration of its LCD TV business in the US, the report said. During this period, the company cut 10% of its global workforce.
Sharp is also considering a rival bid by the state-backed Innovation Network on a bailout deal that would rescue the electronics firm. A principal analyst for the Enderle Group, when asked about the Foxconn, and rival Japanese-backed bid, said, “The bottom line is that Sharp is going to get bailed out by someone…I doubt Apple will care about Sharp, but the Japanese are not happy about Sharp being owned by Foxconn…I expect them to block the deal as a result.”
It’s been speculated Apple orders make up at least 50% of Foxconn’s revenue stream, per the Financial Times. Yet with sales of iPhones notably slowing in recent years, coupled with the fact that Apple has itself looked to break free from relying too much on one manufacturer, Foxconn’s path for future growth appears uncertain.
In recent years, Foxconn has turned to investing in areas ranging from electric cars (specifically, battery technology) to robotics. In addition to the potential for growth, such areas promise higher margins, which are notoriously low in labour-intensive assembly work.
It remains to be seen whether this Sharp bid will be successful. A buyout decision is expected by the end of January or early February.
Credit: Extreme Tech