Options narrowing for Japan’s cash-strapped Sharp; may face future as Apple component maker

“Japan’s cash-strapped Sharp Corp may end up with only one option to survive – dump its consumer business and submit to a future as a component maker for Taiwanese partner and fellow Apple supplier Hon Hai Precision Industries,” Reuters reports.
“The struggling pioneer of LCD televisions is relying for backing on its main banks, Mizuho Financial Group and Mitsubishi UFJ Financial Group. A source at one of Sharp’s main banks told Reuters those lenders may insist on closer ties to Hon Hai and the sale of non-LCD businesses to raise cash in return for help,” Reuters reports. “Battered by foreign competition and waning demand for its TVs, and too few customers to buy its LCD panels, Sharp’s shares have lost nearly three-quarters of their value since the start of the year. The cost of insuring its debt against default has been widening since February. A major stake in Sharp would give Hon Hai, whose shares jumped on Monday, some control over another piece of Apple’s supply chain. Sharp supplies screens for the U.S. company’s iPhones and iPads, some of which are assembled in the Taiwanese company’s factories.”

Reuters reports, “Local TV rivals Sony Corp and Panasonic Corp , have also been hurt as overseas competitors, particularly South Korea’s Samsung Electronics, steal market share… Before revealing expanded losses on Thursday, Sharp had been relying on a cash injection of 66 billion yen from Hon Hai, the flagship of Taiwan’s Foxconn Group, in return for giving it a 10 percent stake. The deal was agreed in March but has not yet been paid… The choice for Sharp is to accept less money or agree a bigger stake for Hon Hai – and with it greater management say that may urge it to close down its TV assembly plants and sell off its solar panel and appliance units.”

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