Sharp Pain for Japan Corporation

The competition between a Taiwanese manufacturer and government-backed Japanese investment fund over buying deal of a major Japanese electronic maker was concluded as the first victory of foreign capital to include well-known Japanese electric brand. A traditional Japanese business model to raise private company with national support proved to be obsolete.

Japanese electronic maker Sharp announced on Thursday that it would accept a deal for buyout with investment of ¥489 billion offered by Hon Hai Precision Industry, or Foxconn, in Taiwan. With the deal, Sharp can spend ¥200 billion for development of next-generation liquid crystal panel or organic electronic luminescence. Hon Hai will buy ¥125 billion of preferred stock from main banks of Sharp and real estate for a factory in Sakai city, Osaka with the price of ¥50 billion. Total price of the deal goes up to ¥660 billion.

A governmentally backed fund, Innovation Network Corporation of Japan had been offering a deal of ¥300 billion of investment, which was dismissed by management board of Sharp. Main reason was opposition from two main banks, Mizuho and Tokyo-Mitsubishi UFJ. Mizuho raised a question whether liquid crystal panel was a technology for Japanese government to protect.

It was said that INCJ had been considering restructuring of electronic makers, including Toshiba, Hitachi or Fujitsu. That was an effort of Ministry of Economy, Trade and Industry, which had been said as the headquarters of Japan Corporation, to make Japanese electronic brands competitive in the world market again. But, there were not so much interest in the union of underdogs and government-made business strategy.

Under the umbrella of Hon Hai, the brand of Sharp will remain. Sharp as a whole can continue its effort for reconstruction without any concern of dissolving the group. Hon Hai will not require the main banks further financial support. However, it is still unclear that Sharp can be successful in changing its business model of concentrating its investment in one specific technology like liquid crystal panel. Entire concept of the future is not determined.

World competition in electronic business is growing to be sharp. China or South Korea has been broadening its share in the market. Toshiba, for example, is painful in its management scandal of false accounting. Restructuring is inevitable for all makers. But, they do not have a viable solution for survival.