Thoughts About Sharp from ISE

This week we have a combined issue of Large and Mobile Display Monitor as nearly all the European team has been on the show floor at ISE in Amsterdam and I’m writing this in the press office at the show – where the “Happy hour” of free beer has just started at 12:00 noon! The show has been interesting, of course, although there was little that was really new, as we reported on a lot of the developments at CES a couple of weeks ago. However, we got a lot more depth this time. We’ll have a full report for you next week. In a couple of weeks, we’ll have another combined issue as we will be at the Mobile World Congress in Barcelona.

One of the topics on the show floor was the Sharp situation. I had sympathy for the staff from Sharp at the booth, as they will know nothing more than those of us that are scanning the news. This kind of deal is done “above the cloud layer” and out of sight of the operational groups. Still, the developments this week have been very interesting.

On the face of it, the Foxconn looks like the better deal from a financial view and Terry Gou has been (mostly) an enthusiast for the acquisition of Sharp, whereas the INCJ seems to be saying “there’s probably a price at which this makes sense, but…”. Of course, Japan will not like to lose such a significant company as Sharp to a Taiwanese owner. Japan has a long history of trying to manage its industrial development. MITI, the Japanese government department responsible for industrial strategy has tried to influence companies to go in particular directions to deliver a relatively co-ordinated strategy. There’s a well-known story that the department told Soichiro Honda many years ago that he should not get into the car business, but should concentrate on motorcycles. Honda argued and then ignored them. That turned out pretty well for Honda.

Although there would be fabs that could make large panels still under the control of Japanese companies if Foxconn did win this battle, they are not being used for that, these days. They are concentrating on making panels for mobile devices and so, effectively, Japan would be out of the large panel business. That would leave Japanese TV makers at the mercy of the Korean, Taiwanese and Chinese suppliers. The reality is that the remaining TV makers are already buying panels from Korea. It’s some years since Sony pulled out of a closer collaboration with Sharp on panel supply for TVs (amidst rumours of seriously bad relationships between the companies).

Of course, on the horizon is the new G10.5 LCD plant being built by BOE and that is going to give Sharp some significant competition in the area where it is most competitive, very large panels, when it comes on stream. Foxconn with its vertical integration would look like a better home for the large panel business. However, the deal would also give Gou a very well known name and a global sales network and that may also be appealing. The company has previously tried to get away from just being an OEM supplier. Gaining the Sharp network and brand would be another chance to do this.

Still, like the Sharp staff, I’m “below the cloud layer”, so I’m still expecting to be surprised about the finally outcome!