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Yoshida in Japan: Who's calling the shots at Sharp?
Junko Yoshida
3/7/2013 3:31 PM EST
Behind Samsung-Sharp deal
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.
The 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.
The 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.
Sharp 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 finances.
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.
After 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.”
But more 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.”
Very interesting. But that begs another question. Where is Sharp’s future if its best work is producing 20th-century LCD technology?
Related stories:
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.
The 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.
The 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.
Sharp 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 finances.
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.
After 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.”
But more 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.”
Very interesting. But that begs another question. Where is Sharp’s future if its best work is producing 20th-century LCD technology?
Related stories:
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G-Linden
3/7/2013 8:53 PM EST
Thanks for this great behind-the-headline analysis!
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eewiz
3/8/2013 12:32 AM EST
"But that begs another question. Where is Sharp’s future if its best work is producing 20th-century LCD technology?"
I guess this deal is more about Sharp's IGZO backplane tech. That's not 20th century stuff.
Since Apple made a deal with Sharp for the IGZO panels, Samsung gotta have it :)
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HT-Analyst
3/8/2013 5:11 AM EST
Looks like that the Sharps customer want to secure supply and invest for that. A short term solution for the customers, but what when others sources become available and they try to sell the shares bought?
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sprite0022
3/8/2013 9:22 AM EST
hey Junko,
can you answer the question of
Will american military target civilians (intentionally) at war in certain cases?
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Big Paul
3/10/2013 11:42 AM EDT
This is one of the more bizarrely off topic trolls I have seen in a while.
Given your posting history, it is safe to say sprite0022 is the inappropriate thing floating in the punch bowl.
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sprite0022
3/10/2013 9:49 PM EDT
@BP
I am the one who is actively protecting the reputaion of eet.
by monitoring and offering kind suggestion s for improvement.
you are the one who is losted and should just keep quite all the time.
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