Sharp to supply technology to Hon Hai's China plant: Nikkei

TOKYO (Reuters) - Japan’s Sharp Corp will supply technological know-how to Taiwan’s Hon Hai Precision Industry Co for a plant in China that will produce panels for Apple Inc’s iPhone and other consumer electronics products, the Nikkei business daily said on Thursday.

Sharp's logo is seen at an electronic shop in Tokyo October 29, 2009. REUTERS/Kim Kyung-Hoon

Shares of Sharp, which is trying to turn around its fortunes after sinking to a record net loss of 376 billion yen ($4.75 billion) in the just-ended financial year, surged 7 percent after the report.

An agreement to share its technology would further tie Sharp to the Taiwanese company, which in March agreed to buy a 46.48 percent stake in Sharp’s liquid crystal manufacturing plant in Sakai, western Japan, the nation’s most advanced panel factory.

Sharp was hit hard last year by a glut in supplies of LCD panels and weak demand for TVs, prompting it to tie up with Hon Hai in a bid to utilize idle production capacity. The alliance is also an opportunity for Hon Hai to tap the manufacturing expertise of Japan’s leading panel maker.

Hon Hai in March also agreed to purchase new shares in Sharp worth 66.9 billion yen ($844 million), giving it an 11 percent stake in the Japanese company.

The Nikkei said that the new technology handover, for which Sharp will receive tens of billions of yen in fees, is aimed at improving quality management at Hon Hai’s planned plant in Chengdu.

A Sharp spokeswoman said the company was “considering a number of options,” but declined to comment on the report.

Also on Thursday, Sharp said that Sharp Display Products, the subsidiary that operates the Sakai plant, would buy back a 7.04 percent stake owned by Sony Corp, liquidating a partnership between the two TV makers. Sony had said following the Sharp-Hon Hai agreement in March that it could ask Sharp to buy back its stake.

Sharp said that suppliers Dai Nippon Printing and Toppan Printing had agreed to merge their units that make films for Sharp’s LCD panels into the Sakai unit in return for a stake in the plant.

The result of these deals will leave Sharp with a 37.6 percent stake in the LCD factory, allowing it to remove the money-losing company from its list of group companies and reclassify it as an affiliate.

Sharp shares closed up 7.1 percent at 395 yen, while the benchmark Nikkei index was mostly flat.

($1 = 79.2300 Japanese yen)

Reporting by Tim Kelly and Mayumi Negishi; Editing by Chris Gallagher