Foxconn finally agreed to a deal to buy Sharp Corp., and it will do so at a steep discount from its original offer.
Foxconn will spend $3.5 billion to take over the struggling Japanese consumer electronics behemoth, ending weeks of public negotiations. Foxconn had committed to pay roughly $6.2 billion for a 66 percent stake in Sharp last month before it reportedly discovered more than $3 billion in undisclosed liabilities, prompting it to shelve the deal.
The move appears to be a big win for Foxconn's crucial iPhone business. Last fall, Foxconn signed a letter of intent to buy a stake in Sharp's liquid crystal display business in a move that would have given the company control of Sharp's LCD unit, which produces some of the displays that go into the iPhone.
Foxconn doesn't make displays, which are far and away the most expensive single component in the iPhone. So the takeover will enable Foxconn to add displays to its offerings, providing a way to increase sales revenues from Apple. It may also enable Apple to buy yet another component from Foxconn -- a longtime partner -- rather than having to buy displays from competitors such as LG or Samsung.
Sharp also produces OLED displays. The price of such screens has decreased substantially in recent years, and Apple is said to be considering adding an OLED display to a new iPhone model next year.
The acquisition may eventually enable Apple to spend less to manufacture the iPhone even as Foxconn's manufacturing revenues from the device ramp up. That may not result in cheaper iPhones in markets such as the U.S. and Western Europe where users have few qualms about paying top dollar for Apple's products, but it may enable Apple to lower the price of its handsets in emerging markets where consumers are often more price-sensitive.
"I am thrilled by the prospects for this strategic alliance and I look forward to working with everyone at Sharp," Foxconn CEO Terry Gou said in a prepared statement. "We have much that we want to achieve and I am confident that we will unlock Sharp's true potential and together reach great heights."
For more:
- see this press release
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