Samsung Electronics has agreed to take an equity stake in troubled Japanese group Sharp, in the first capital tie-up between major consumer electronics makers in South Korea and Japan.
Samsung, the world’s leading producer of liquid crystal displays by volume, will invest 10.4 billion yen for a 3 per cent stake in Sharp, it said yesterday. This will make Samsung one of the largest shareholders in the Japanese group, a rival in the global LCD and television industries.
The companies have also agreed that Sharp will provide Samsung with state-of-the-art, large-sized LCD panels for TVs and small and medium-sized panels for smartphones and notebook PCs. It already supplies Samsung with panels for 32-inch TVs.
The South Korean company will become Sharp’s fifth-largest shareholder after major Japanese financial institutions such as Mizuho, which is one of Sharp’s main lenders.
Sharp, which has forecast a record Y450 billion loss in the fiscal year ending March 31st, has been under pressure to find an investor and shore up its capital base. Its capital adequacy ratio was 9.6 per cent at the end of December. Lee Jae-hyuk, an analyst at Daiwa Securities, estimates that Samsung bought about 6 per cent of its television panels from Sharp last year and is likely to increase the portion this year.
“Sharp is the only company with a 10th-generation production line for large-sized panels above 60 inches. So it is more economical for Samsung to buy large-sized panels from Sharp rather than building its own factory,” he said.
Mr Lee described the deal as “win-win”, noting that it “reduces some investment burden for Samsung at a time of slowing TV demand and overcapacity in the industry. Shares in Sharp surged 19 per cent in early trading before ending yesterday with a gain of 14 per cent. Samsung’s shares rose 0.7 per cent. – (Copyright The Financial Times Limited 2013)
