Sharp to expand Hon Hai tie-up with eye on Chinese market

Sharp Corp. said Friday that it will expand its partnership with Taiwan's Hon Hai Group into the lower-end smartphone business in China, as the struggling Japanese consumer electronics maker seeks new avenues for growth after a huge loss in the last fiscal year.

"As digital products are getting to be like commodities, it is hard for Sharp by itself (to compete on prices)" in China, Sharp President Takashi Okuda said at a press conference.

Sharp's plan to work more closely with Hon Hai in smartphones follows their capital partnership announced earlier this year--a major strategic shift for the Japanese company which until then had mostly tried to compete on its own with higher-end products.

The company now plans to target a wider customer base by tapping into its partner's vast resources in production and procurement to sell new, lower-priced models, Mr. Okuda said, adding that it plans to launch several new models in the fiscal year starting April 2013.

Sharp will target a broad range of smartphones with prices between CNY1,000 to CNY4,500, he said.

The capital alliance came as Sharp's mainstay liquid crystal display panel and television businesses were making hefty losses. For the fiscal year that ended March 31, Sharp posted a record net loss Y376.08 billion due largely to red ink at its display panel operations.

Under their agreement in March, Hon Hai Precision Industry Co. and its group companies are in the process of acquiring a 10% stake in Sharp for Y66.91 billion--the biggest-ever investment in a Japanese company by a Taiwanese firm.

As part of the alliance, Hon Hai decided to take half of Sharp's 92.96% stake in its LCD panel factory in Sakai, western Japan. Sharp took a big hit from the low operating rate of the plant after running it only at about half of its capacity in the January-March quarter to cut back on bloated inventories.

Hon Hai will begin procuring panels from the factory in the fiscal second quarter through September, helping to bring the operating rate back to around 90%, Mr. Okuda said.

Mr. Okuda also said that Sharp aims to increase its overseas revenue to 70% of its overall group revenue from the current 50%. The company will also try to increase its revenue from businesses other than LCD panels and TV sets, such as home appliances and solar panels.

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