Samsung has purchased a small stake in Sharp, in a move that will ensure a steady supply of LCD panels
Samsung and Sharp have reached an agreement that will see the South Korean electronics giant purchase a 3 percent stake in the struggling Japanese company for about $111 million (74m pounds).
Sharp, notably, is a major supplier of mobile displays to Samsung rival Apple.
Sharp, in a 6 March statement, said it has decided to issue new shares through a third-party allotment, the purpose of which, it explained, “is to build up mutual trust relationship toward increase in the corporate value of Sharp and Samsung Electronics in the field of liquid crystal display (LCD) … and at the same time to enhance Sharp’s capital adequacy.”
The statement added that as part of the agreement Sharp, which currently supplies Samsung with LCD panels, will provide a “long-term, stable and timely supply of LCD panels” for televisions, notebooks and mobile devices.
While Samsung has said it won’t have a hand in management issues, the deal is likely to give Samsung priority over Apple, which has historically held a tight rein on its suppliers.
The deal also helps out Sharp, which is desperately in need of cash, with sales of televisions slowing, in a limping global economy, but also sales of iPhones beginning to slow.
According to Bloomberg, Apple accounted for 3.4 percent of sales last year. An analyst with Singapore-based BGC Partners told Bloomberg, “Sharp was the first supplier that was cut out when iPhone demand started to slow. Chances for Sharp to revive as a stand-alone company are zero unless becoming part of a big group like Samsung or Foxconn.”
By multiple reports, before reaching the deal with Samsung, Sharp approached both Foxconn and Intel.
Apple had record quarterly revenues for its 13-week 2013 first quarter, it announced 23 January. It sold 3.5 million iPhones and 1.7 million iPads per week during the quarter, which brought in a net profit of $13.1 billion.
Still, Apple faces a tremendous competitor in Samsung, and during the quarter, the 47.8 million iPhones it sold fell short of the 50 million analysts were expecting.
CEO Tim Cook, during the earnings call, addressed the market rumours that iPhones were selling as they once had.
“Even if a particular data point were factual, it would be impossible to accurately interpret the data point as to what it means for our business,” Cook said, “because the supply chain is very complex and we obviously have multiple sources for things – yields might vary, supply performance can vary, the beginning inventory can vary.”
In November 2012, Sharp announced the results of a voluntary retirement program (2,960 employees volunteered to retire) meant to cut costs over the long term, but said that the expense of the program would be recorded as an “extraordinary loss” during its third quarter, which ends March 31.
Sharp has forecast a loss of about $4.8 billion (3.2 pounds) for this year.