Apple supplier Sharp to boost Samsung business in bid to stay viable

TOKYO Fri May 10, 2013 6:37pm EDT

A woman walks past the Sharp Corp's Logo at a train station in Tokyo March 6, 2013. REUTERS/Yuya Shino

A woman walks past the Sharp Corp's Logo at a train station in Tokyo March 6, 2013.

Credit: Reuters/Yuya Shino

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TOKYO (Reuters) - Sharp Corp, Japan's leading maker of liquid crystal displays, will rely on expanding supplies of small panels to Samsung Electronics Co while still shipping screens to rival Apple Inc, in a bid to raise factory output levels and remain viable, three sources said.

In a midterm business plan it aims to release on Tuesday when it announces its latest earnings results, Sharp will set a goal of raising annual operating profit to $1.5 billion by March 2016 on revenue of $30 billion, the sources familiar with the plan told Reuters on condition they remained anonymous.

Japan's TV pioneer avoided failure last year with a $4 billion bailout from lenders including Mizuho Financial Group and Mitsubishi Financial Group. Sharp will borrow another 150 billion yen ($1.47 billion) to help it repay a 200 billion yen convertible bond due in September, the sources said.

Those banks will dispatch personnel to take up senior management positions at Sharp, including a financial officer, which will also reduce its number of directors by 12 people, the sources said.

Sharp in October had to mortgage its offices and factories in Japan, including the one that makes screens for the Apple iPad and iPhone. It also had to agree to trim its workforce by 10,000 people and seek buyers for overseas assets including TV assembly plants in China, Malaysia and Mexico.

Deepening its ties with Apple's South Korean competitor, Samsung Electronics, comes as growth at Apple slackens and orders for screens slow. Analysts project profit growth at the smartphone pioneer to average less than 5 percent for the next decade compared with an average of 60 percent over the past five years.

Sharp, which at the start of the year was forced to curtail production of 9.7-inch screens for Apple's iPad, began limited panel fabrication for Apple's next iPhone, with mass production slated to start in June, the sources said.

Samsung Electronics in March said it would inject $103 million into Sharp in return for a 3 percent stake in the Japanese company in a deal that secured it supplies of small LCD screens. Sharp, however, rejected a proposal by Samsung to buy its copier and printer business.

Sharp raised additional cash by agreeing in December to sell an equity stake to mobile chipmaker Qualcomm Inc, for $120 million. The two companies also agreed to cooperate in developing new screens based on Sharp's low power consumption IGZO panel technology.

The Japanese company will also try to expand sales of household appliances in Southeast Asia in a bid to underpin earnings over the next three years, the sources said.

Sharp will likely report a 500 billion yen net loss for the year ended March 31, sources earlier told Reuters, worse than the 450 billion yen deficit it forecast in November.

Its operating profit for the second half of its business year was 20 billion yen, compared with the company's forecast for 13.8 billion yen, the sources added.

Since the start of the year, Sharp's shares have gained 49 percent, closing 6.4 percent higher on Friday at 450 yen. That compares with a 41 percent rise in the benchmark Nikkei 225.

($1 = 101.7800 Japanese yen)

(Additional reporting by Taiga Uranaka; Writing by Tim Kelly; Editing by Tim Dobbyn)

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Comments (1)
VonHell wrote:
What are the chances of a former huge company surviving with sales of small screens for one product of a huge company (with other competitors)?
The Sharp cellphone drama is the same history of the TV drama… i m thinking about the messy brazilian cellphone market… in a few years the number of lines surpassed the number of people and it is still rising… they sell phones with 2, 3, 4 chip slots and some people use 4 different operators… and sold chips without phones until recently…
Once a neglected market by the phone makers with a few handfull of ultra expensive imported devices, now there are phones of all major brands… selling 50% more expensive but yet surprisingly crushing the chinese cheap phones share to only 10% of the market…

Samsung was there since the begining of the expansion… even if their phones at the time (like the the Voicer I, II, Next, and Colors) were nothing compared with the japanese phones 10 years ago…
Today the S4 is there as much of the best Samsung has to offer …
now give a look on what softbank jp has to offer
where are the S3, the S4, LGs and all the best smartphones in the world? … 10 years… what a difference…

May 11, 2013 2:52am EDT  --  Report as abuse
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