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Japan's century-old Sharp grabs foreign lifeline

International Business
Wed, 30 Mar 2016
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Tokyo: It took a century for Sharp to evolve from making pencils into one of the world's top consumer electronics brands, but the Japanese company has now signalled another huge shift: it will become Taiwanese.

Sharp became a household name as one of the first major producers of LCD technology, but misjudged investments have left it grappling with mounting losses and saddled with huge debts.

A restructuring plan failed to stop the bleeding and Sharp on Wednesday agreed to be bought by Taiwanese multinational Hon Hai Precision, the world's biggest electronics supplier, better known as Foxconn.

The $3.5 billion deal -- hailed by the firms as a "historic strategic alliance" -- marks the first foreign takeover of a Japanese electronics giant, after Sharp eschewed merging with a domestic rival.

It also marks a watershed for Japan's once-mighty home electronics sector, which nurtured global brands including Sony and Panasonic but has struggled in the face of foreign competition.

"Sharp has competitive know-how and technologies. For Hon Hai, it's a good buy," said Hideki Yasuda, an analyst at Ace Research Institute in Tokyo.

"It wanted a brand for finished products and it can make use of the Sharp name."

For years, Sharp -- whose brand once graced the jerseys of Manchester United football players -- remained true to its humble roots.

But after company founder Tokuji Hayakawa lost his wife and two children to the 1923 Tokyo earthquake, which killed more than 100,000 people, he started to diversify into emergency equipment.

From radios the firm expanded into other electronics, and after World War II Sharp became the first Japanese firm to sell televisions.

This tradition of innovation continued through the 1970s, with the mass production of liquid crystal display (LCD) screens for calculators that were later adapted for computers, smartphones and tablets.

Sharp is a global leader in those small- and medium-sized screens, which are a key asset for Hon Hai.

The companies have worked together for years on large-screen technology, including for televisions, and jointly operate an LCD panel plant in Japan.

Over the last decade Sharp bet almost everything on LCD, boasting the most advanced technology in the world.

But that turned into a weakness when the market became more competitive after the 2008 global financial crisis and lower-cost rivals dug into Sharp's profits.

While the firm still produces cutting-edge LCD screens, it has lacked the huge research and development funds necessary to keep ahead of the competition.

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