Chimei Innolux
Reports in Japan say Sharp's agreement with the huge outsourced electronics manufacturer looks set to create the world's biggest player in LCD panel manufacturing

According to reports in the Japanese press, Sharp chairman Katsuhiko Machida has announced that the company has concluded a deal for LCD TV display panels with Hon Hai Precision Industry Co of Taiwan, the world's largest 'make to order' electronics manufacturer.

The deal is thought to involve Hon Hai's Chimei Innolux company, part of its Foxconn group, supplying smaller TV panels – up to 40in – to Sharp, and also acting as an OEM manufacturer for Sharp LCD TVs, using Sharp panels for larger-size sets.

In addition, the two will jointly buy components such as glass and filters, allowing them to achieve considerable economies of scale, while Sharp will supply technical expertise to Chimei Innolux to upgrade its manufacturing.

Hon Hai's Foxconn subsidiary already manufacturers for many major electronics brands including Apple, Acer, Asus, Dell, HP, Nintendo and Sony Ericsson, not to mention being Sony's largest OEM LCD TV manufacturer, having bought the Sony assembly lines last year.

It's China's largest exporter, and bringing Sharp and Chimei Innolux together will create an LCD manufacturing capability thought to be able to account for almost 30% of all panel capacity worldwide, outstripping Korean giants LG and Samsung.

Japanese analysts suggest that while Sharp has huge capacity for so-called 10th-generation LCD Glass, best-suited to the manufacture of larger display panels, the deal will give it more scope to sell these panels, thus making better use of its recently completed 10th-gen manufacturing facility in Japan.

In return, the arrangement will also help Chimei Innolux maximise use of its current 6th/7th-generation glass capacity, although it does raise questions about Sharp's panel contract with Chinese manufacturer CEC-Panda, to which the Japanese company sold its 6th-generation plant.

CEC-Panda is thought to be building up its 6th-gen production, but it now seems likely Sharp may switch its procurement to the new joint operation with Hon Hai, which will be headquartered in Taiwan.

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