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Samsung to Invest in Rival Sharp

05 March 2013

Samsung Electronics Co. and display rival Sharp Corp. will be allies going forward as Samsung has confirmed that it plans to invest $111.6 million in the struggling Japanese conglomerate. Samsung will be filling a gap left by Hon Hai Precision Industries, which had agreed to take a 10 percent stake in Sharp last year.

The alliance has implications for US consumer giant Apple Inc., which has been locked in a patent battle on several fronts with smartphone and tablet rival Samsung. Hon Hai, through its Foxconn Technology business, is Apple’s biggest manufacturing partner; Samsung is a leading supplier of displays to Apple as is Sharp. Hon Hai’s deal with Sharp would have locked up a key source of supply and access to display technology. Hon Hai exited the deal after Sharp’s stock sharply declined.

The 3 percent stake in Sharp makes Samsung the fifth-largest shareholder after four major Japanese financial institutions.

One technology edge Sharp can bring to the table is a display technology using indium gallium zinc oxide (IGZO), which, according to Sharp, helps make screens more energy efficient. As part of the deal, Samsung, which already buys some LCD screens from Sharp, will get a more stable long-term supply of screens for TV sets, laptop PCs and tablets.

“Sharp is a leader in the development of oxide thin film transistor (TFT) displays,” said Sweta Dash, Senior Director of Display Research and Strategy at IHS.It’s considered to be the next generation technology for high resolution products. Samsung’s partnership with Sharp will provide both an assured supply of oxide TFT displays and involvement in the development of future products.”

Samsung has spun off its liquid crystal display (LCD) business into a separate entity in order to focus on leading-edge organic light emitting diode (OLED) technology. OLED screens are lighter and more energy-efficient than the widely-used LCDs.

"The investment is set to fortify the partnership between Samsung and Sharp and also lay a firm foundation for Samsung to secure a steady supply of LCD panels from diversified sources," the South Korean company said in a statement.

Samsung said it will have no involvement in Sharp's management. The two companies expect to complete the deal later this month.

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