JAPAN/CHINA: Sharp offloading some of its TV business to computer maker Lenovo
Beleaguered consumer electronics company Sharp is in the final stages of talks to form a TV-manufacturing joint venture with Chinese PC manufacturer Lenovo, according to Japanese press reports.
The plan would see Sharp selling its shares in a subsidiary making LCD TVs in Nanjing, China, to Lenovo by the end of the year, while other Chinese operations covering development and sales will become joint ventures.
The TVs made by Lenovo will still be sold in China as Sharp Aquos models, and will use panels supplied by Sharp plants in Japan.
It's hoped that more of the capacity of these plants can be utilised by boosting sales in China, and by the two companies working together to expand their sales in Southeast Asia and South America.
Lenovo is also understood to be keen to expand from its current base of making computers, such as its Thinkpad and Ideapad ranges, and establish itself as a global TV manufacturer, in common with other Chinese companies.
The move follows the apparent continued deadlock in talks between Sharp and Taiwan-based electronics production company Hon Hai, which at one stage had been thought to be set to buy a 10% stake in the Japanese company.
However, the fall in Sharp's share price since the start of talks between the two – from Y550 a share when the initial agreement was made, it fell to below Y200 last Summer – is believed to have caused Hon Hai, which builds products for many of the world's largest consumer electronics brands under its Foxconn name at its enormous production bases in China, to demand either a lower price for the 10% stake it wanted, or a much greater stake in Sharp for its planned investment.
And although sources at Hon Hai says it's still interested in buying a stake in Sharp, progress in the talks has been painfully slow, not least because the Taiwanese company's founder and chairman Terry Gou is thought to want not just a share of the Japanese company, but also a role in its management in order to turn it around.
However, it seems Hon Hai, which already has a major stake in Sharp's state-of-the-art Sakai LCD panel plant in Japan, now wants to become a TV brand in its own right.
Lenovo, which built its business following its $1.25bn takeover of IBM's loss-making PC operations back in 2005, and now sells a wide range of computers and ancillaries including the Thinkpad Twist (above) is no stranger to joint ventures:.
It has one for personal computers with Japan's NEC, and holds a majority stake in German consumer electronics company Medion. This latest move sees it moving from being mainly a manufacturer of computers, and into the highly competitive TV market.
For Sharp, the deal would be latest step in its plans to turn around crippling losses, expected to total some Y450bn (£3.14bn) at the end of the current financial year. It also plans to sell off a TV manufacturing plant in Malaysia to Taiwanese OEM company Wistron, and is looking to offload other assets and form further capital alliances to reduce its debts.
The sale of the TV plants was laid out in Sharp's restructuring plans last Autumn, which also call for it to dispose of another facility in Mexico.
Reports of the Lenovo talks boosted Sharp shares by 7.3% in Tokyo today, despite worries that the company may also be hit by Apple's reported scaling-back of orders for smartphone components.
Sharp, Japan Display and LG Display supply screens for the iPhone 5, and fears about excessive exposure to the demands (or otherwise!) placed on Apple supplies are also thought to be one reason behind Hon Hai's move into TVs.