Sharp Takes New Stab at China Smartphone Market

Japan’s Sharp Corp. is making a China “homecoming” with its new line of smartphones, as part of plans by new Taiwanese parent Foxconn to diversify from its traditional strength as a contract manufacturer into a maker of products bearing its own brand names.

Foxconn, which also goes by the name of Hon Hai, purchased 66% of the struggling Sharp last year for 22.5 billion yuan ($3.3 billion), gaining control of a brand whose consumer electronics were once a major world force. Since then it has been trying to breathe new life into the brand, including recent efforts to win back rights to the Sharp name that had been sold to China’s Hisense Co. for North America.

In the past Foxconn’s main strength has been in contract manufacturing, as it makes various electronic products such as smartphones for the likes of Apple Inc. But it wants to build up its branded business, which typically carries higher margins and is less dependent on demand from third-party clients.

Sharp previously re-entered the ultracompetitive China smartphone market a year ago with the launch of its A1 and C1 models. But the company is making a new push with its Aquos S2, which features a screen that takes up a large 87.5% of the model’s surface.

“Now Sharp has changed to a completely new (smartphone product development) team,” said Luo Zhongsheng, CEO of Sharp’s smartphone unit, whose resume includes time at Foxconn’s own smartphone-making unit, as well as Coolpad Group Ltd. and ZTE Corp. “This represents our official homecoming to the China market.”

Japanese smartphones were once a staple in China and other global markets, but have experienced a gradual decline over the last decade and are now mostly non-players. China is the world’s largest smartphone market, with more than 100 million units in quarterly sales. It also typifies the global situation, with local brands taking three of the top five spots in the latest quarter, and the other two places going to Apple Inc. and South Korea’s Samsung Group.

“We hope our different product designs can lift us to the top five or six in the China market,” Luo said. “But Sharp has been absent from China for a long time, so this goal could be very difficult.”

Despite the new backing of a strong parent like Foxconn, which has both money and manufacturing resources, Sharp could still have a tough time breaking into the Chinese smartphone market, said Wang Yanhui, secretary-general of the Mobile China Alliance.

But Wang added that China is large and diverse, meaning a company whose models have distinguishing characteristics and other unusual features could find a place there.

Contact reporter Yang Ge (geyang@caixin.com)