Foxconn to Help Upgrade Sharp’s LCD Line

(Beijing) — Taiwan contract manufacturing giant Foxconn will help upgrade a cutting-edge LCD production line co-owned by Japan’s Sharp Corp — the first major tie-up between the pair since the former took control of the latter in a groundbreaking deal last year.

The agreement will see the government in the southern city of Guangzhou and Sakai Display Production Corp. invest 6.1 billion yuan ($878 million) to upgrade the line that makes 10th-generation liquid crystal displays (LCDs) to 10.5-generation capabilities, the two sides announced just before the New Year.

Foxconn is in the process of a deal that will see it become Sakai’s controlling shareholder with 53% of the company, while Sharp’s stake will fall to 27%. Foxconn owns 66% of Sharp, following a $3.5 billion deal last year that marked one of the biggest-ever takeovers of a Japanese company by a foreign buyer.

The newly announced upgrade will be completed in 2019, and will create a production line capable of making large cutting-edge LCDs worth 92 billion yuan per year, said Foxconn head Terry Gou. He added that Foxconn sees strong demand for the technology from medical companies that can use the LCDs in devices to assist in surgeries and other medical procedures requiring very high resolution.

Foxconn’s purchase of Sharp was part of its own broader move into higher-end component manufacturing, as it edges away from its roots as an assembler of electronics for many of the world’s top brands, including Apple Inc. Foxconn also wants to develop its own brand, another area where Sharp has a presence, as margins for its traditional manufacturing services get squeezed by rising costs.

“In the past, Foxconn’s logic was to rely on its own strength and good customer service to do business,” said a company insider, who declined to give his name because he wasn’t authorized to speak publicly about the deal. “Now with the Sharp acquisition, the thinking is it’s more about brand development. First we’ll spend some money to get our name out there, and then we’ll earn some money.”

Contact reporter Yang Ge (geyang@caixin.com)