News about Sharp has been leaked in dibs and drabs over the past 12 months. It makes us all wonder who's really in charge of the firm.
Then, earlier this week, the Nikkei broke the story that Sharp is
expected to accept a 10 billion yen ($107 million) investment from South
Korea's Samsung Electronics Co. Ltd.
Then, Wednesday, Samsung
officially confirmed that it will invest 10.4 billion yen ($111.5
million) in Sharp to secure a supply of large-size LCD panels.
agreement gives Samsung a 3 percent stake in Sharp and a supply of large-size
LCD panels for televisions. Samsung said in a statement that the
investment will help strengthen Sharp's LCD panel business. The South
Korean company said it will not be involved in Sharp's management.
alliance with Samsung is clearly a much needed boost for a troubled
Japanese company that has been seeking to raise capital as part of its
turnaround plans. Sharp shares jumped 14.1 percent in Tokyo trading.
But of course, Sharp’s financial trouble isn’t over. Far from it.
will need to repay a $2.1 billion convertible bond due in September, at
a time when there are no other deals–after the latest arrangement
with Samsung–in sight.
Sharp, which last November said it may
not be able to survive on its own, will have to sell its overseas
factories and other assets to pay off the bond in September. In fact, to
secure its bailout last year, Sharp pledged to cut jobs and sell assets
while mortgaging nearly all of its factories and offices in Japan,
leaving it with only overseas assets that could be sold to improve its
Once again, stories about Sharp being in talks to
offload its Chinese TV assembly plant to Lenovo Group Ltd, and to sell
its Mexico factory to Taiwan’s Hon Hai have been recently leaked.
Neither deal is sealed. Meanwhile, Sharp’s talks for Hon Hai to buy a
stake in the company originally announced a year ago have stalled with a
March 26 deadline fast approaching.
The financial community is now saying that Sharp is likely to seek fresh bank loans to meet its September obligations.
I should, however, note that it isn’t fair to blame Sharp only for all this ineffective communication.
all, the whole soap opera around Sharp involves many actors, not the
least of whom are Japanese government bureaucrats who last September
brokered a deal for putting together $3.9 billion in emergency loans.
Bankers at Mizuho Financial Group and Mitsubishi UFJ Financial Group put
up the money.
While all the players–including the media--participate in the “Save Sharp” parlor game, the missing piece is vision
and strategy from Sharp’s leaders, to articulate where the company
wants to be. After all, you can’t finish the game if you don’t know how
to determine the winner.
But as Sharp awaits investments from
Qualcomm and Samsung, one thing seems clear. As David Hsieh, vice
president, greater China market for DisplaySearch, wrote in his recent
blog, “Sharp’s strategy is to balance multiple investors rather than
rely on one,” leaving Foxconn unhappy. “In the business world,” said
Hsieh, “there are no permanent enemies or friends. Sharp and Samsung
disliked each other in the past, but the present realities may lead them
to work together.”
Hsieh’s analysis of the Samsung-Sharp deal,
however, is more indicative of what Samsung may be up to, rather than
what Sharp is planning for its future.
The DisplaySearch analyst
speculated that Samsung’s purpose in this deal is to mainly secure TV
panels, especially 32-, 40- and 60-inch. In fact Sharp has been already a
key 40-inch supplier to Samsung, with more than 400K per quarter, and
60-inch with more than 200K per quarter in Q3 ’12. “So it may make sense
for Samsung to invest [in Sharp] to secure the source.”
interesting to me in Hsieh’s blog is this: “Given that Sharp is a
leader in oxide TFT technology, it’s possible that Samsung can utilize
the oxide TFT backplanes from Sharp for its AMOLED TV.” If true, it’s
possible, as Hsieh noted, that “the Samsung Group intends to curb new
TFT LCD capacity expansion and focus more on AMOLED TV.”
interesting. But that begs another question. Where is Sharp’s future if
its best work is producing 20th-century LCD technology?