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Hon Hai spunks billions into struggling LCD biz

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Foxconn owner Hon Hai Group has given limping Sharp a crutch by buying a stake in the Japanese electronics maker and pouring a few billion yen into its LCD business.

Taiwanese Hon Hai will hand over ¥66.9bn ($806m, £507m) for a 9.9 per cent stake in Sharp - and will fork out another ¥66bn for a 46.5 per cent stake in the joint venture telly business Sharp has with Sony.

LCD shipments worldwide have slowed for everybody, but Sharp is also suffering, along with Sony and Panasonic, from a major kicking in the market by Korean electro-behemoth Samsung. Sharp forecasts a net loss of ¥290bn ($3.5bn, £2.19bn) for the year ending March 31.

"The market surrounding electronics industry is becoming severe, with rapid price decline due to the development of digital technology and increasing competition in a global market," Sharp said in a statement on the deal with Hon Hai. "We believe timely action is necessary to tackle these changes in the market."

Japanese trio Sharp, Sony and Panasonic are taking harder hits in the LCD sector because they have struggled to stay competitive as they battle against a strong yen.

Sharp said the partnership with Taiwanese Hon Hai would allow the LCD biz to "launch cost-competitive components and products that fit to market demand". Sourcing stuff from Hon Hai should help Sharp to bring its manufacturing costs down and price tellies more attractively.

Sharp also said today that Sony was sticking with the joint venture, named Sharp Display Products (SDP), for the moment, although it won't be injecting any more capital for now.

The venture, in which Sony holds about seven per cent of shares, was agreed in April 2011 and will be next reviewed this September.

Today's amendment to the deal stipulates that Sony can demand that Sharp buy back its stocks, even before that month, "upon the occurrence of certain events, such as a transfer by Sharp to any third party of some or all of the shares that Sharp has in SDP".

After the Hon Hai deal, Sony has its seven per cent, Sharp now holds 46.5 per cent and Hon Hai, its founder Terry Gou and other investment corporations now hold about 46.5 per cent. ®

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