Over the last third of 2012, more less between September and December 2012, Sharp kept popping up in various financial news reports not only because it remains in dire straits financially, but also because at various times it had been rumored that Qualcomm, then Intel and Qualcomm and finally Intel and Dell, were going to make relatively hefty investments in Sharp - possibly as much as $375 million.
Intel and Dell never took the plunge, but ultimately Qualcomm did invest $120 million in exchange for a 2.56 percent stake in Sharp. At the time, the two companies also signed a co-development agreement around Sharp's IGZO LCD technology.
IGZO is quite interesting for a number of technical reasons, but perhaps even more interesting is a business-related reason, namely that Apple might be using the technology in its next generation of mobile devices. Further, as the Samsung Semiconductor-Apple business relationship began to sour due to the Apple-Samsung patent wars, Apple began to look to Sharp as a much more prominent replacement for Samsung as an iPhone and iPad display provider.
All of this is interesting, but now Samsung has chosen to play a more aggressive role as far as Sharp is concerned. Already all over the tech and financial news this month due to its upcoming March 14, 2013 launch of the new Galaxy S4 (or S IV - whatever), Samsung has now delivered yet another newsworthy - or rather news- and headline-grabbing - move, with the announcement today that it has invested $112 million in Sharp, which amounts to a 3.08 percent stake in the company.
It is an interesting move on several fronts. First, it isn't necessarily common knowledge that Sharp is a Samsung supplier and provides Samsung with a number of large screen TV displays, not to mention some share of the displays that go into Samsung's mobile devices. For Samsung the deal may ultimately prove to be nothing more than an insurance policy to ensure that Sharp will continue to be a reliable supplier.
It is absolutely necessary to note here that last year Sharp - already in dire need of cash, sold off three of its plants to Chinese player Foxconn - yes, the very same that works closely with Apple to deliver Apple's mobile products. There had been another Foxconn deal in the works to acquire up to 10 percent of Sharp for $800 million that fell apart supposedly because Foxconn wanted a Sharp board seat. The Samsung investment is strictly a cash infusion and Samsung will not be looking to involve itself with Sharp at a management level.
Samsung's major competition over the next few years - at least on the smartphone front - is all going to come from China - ZTE and Huawei are significantly ramping up their efforts, and Samsung needs to be smart about all of the myriad pieces that will play into this competition. Keeping Foxconn out of the mix can only help.
Sharp Ensures Samsung Supply Chain Consistency
From its end, Sharp issued a press release that says the following: "The purpose of this…is to build up a mutual trust relationship toward increase in the corporate value of Sharp and Samsung Electronics in the field of liquid crystal display business, and at the same time to enhance Sharp's capital adequacy." It also notes the following: "Sharp is going to further strengthen the alliance and continuously provide a long term, stable and timely supply of LCD panels for large size TVs and small- and medium-size LCD panels for mobile devices such as notebook computers."
Leaving aside the somewhat stilted English, that more or less says it’s all about what this deal represents. For Sharp it is a new source of lifeblood and for Samsung it ensures a steady supply of displays. Sharp also included a table in its release that points to Qualcomm being the only non-Japanese investor in the company. Samsung now joins that exclusive club.
There has been a good deal of noise that the move by Samsung is in part a further means to gaining some manner of competitive edge over Apple. We sincerely doubt this played any role in the investment.
We do note however that should Apple eventually look to deliver on a smart TV of its own, Sharp would be the key display provider of choice for Apple. In that case, there is always the possibility that today's investment may prove to be an early pawn move that may have hidden advantages for Samsung as the smart TV game progresses.
In any case, Sharp lives to fight another day.
Edited by Brooke Neuman