Foxconn’s Investment in Sharp Being Doubted Due to Display Maker’s Financial Struggles
During the last five months, Sharp’s stock price has dropped by a whopping 70%, marking new 40-year lows. With the shares plummeting by such a high amount, Foxconn’s deal to buy a stake in the struggling Japanese company could be one that they will regret. The issue has prompted an effort by Hon Hai Precision (a parent company of Apple’s device assembly partner, Foxconn) to renegotiate its deal to buy a significant stake in the display marker.
It was previously announced in March that Foxconn planned to buy a 10% ($808 million) stake in Sharp’s LCD business. The deal prompted speculation that the two companies were aligning to secure more of Apple’s business. In June
, Foxconn was contemplating buying an even greater stake in Sharp after a recent steep fall in the LCD maker’s share price. Now, with the prices having fallen so much, Foxconn wants to renegotiate its original deal. The initial deal was based on a Sharp share price of 550 yen ($6.93) per share, but since then, Sharp’s stock has fallen to just 175 yen (a significant difference).
According to the Wall Street Journal
, Foxconn is expected to hold out for the best deal it can from Sharp. Foxconn may even wait to buy Sharp outright at a bargain price if the company can’t turn its fortunes around. Despite the struggles the display maker has been going through, the president did announce that it will ship screens for Apple’s next iPhone, which is expected to be unveiled at a media event on September 12. Sharp was also previously to provide its own LCD display technology known as IGZO (or indium gallium zinc oxide) for Apple’s portable devices. It was later revealed that Sharp’s IGZO technology didn’t meet Apple’s standards for its third-generation iPad with Retina display so the implementation was scrapped.
Source: Wall Street Journal