Samsung to buy strategic stake in ailing Sharp

Samsung Electronics said yesterday it has decided to help out its troubled Japanese rival Sharp by acquiring a 3 percent stake.

The Korean tech behemoth cited a “cooperative relationship with the Japanese electronics company.” The contract, signed yesterday and to be completed by the end of this month, is expected to make Samsung the fifth largest shareholder of Sharp.

“Samsung Electronics Japan, Samsung’s subsidiary in Japan, will buy shares in Sharp valued at 10.4 billion yen, or approximately 120 billion won [$111 million]. 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,” Samsung said in a statement.

It emphasized that the investment will not involve it in the Japanese company’s management in any way.

But analysts said the deal could help Samsung with a stable supply of TV panels sized 60 inches or bigger amid the rising popularity of big TVs. “Samsung-Sharp joining hands is definitely a win-win for both,” said an industry insider who asked not to be named, “Sharp could reduce its heavy reliance on Apple.”

Sharp, Japan’s No. 1 LCD producer, operates an eighth-generation LCD panel factory in Kameyama, Japan and a 10th-generation plant in Sakai. It produces small- and midsized premium LCD panels as well as panels sized 60 inches and larger.

The two companies are expected to complete the investment deal some time this month following the signing of the contract yesterday.

Sharp was Japan’s No. 1 maker of LCD TVs, outpacing Sony and Panasonic in 1998. It made forays into overseas markets and adopted the strategy of slashing the prices of its LCD TVs to a level equivalent to 40 percent of those from Samsung in the mid- 2000s.

But as the yen shot up against major currencies in 2007, Sharp suffered.

The situation worsened earlier this year as Apple trimmed orders of displays for the iPhone 5 after worse-than-expected sales. Sharp forecast a loss of 450 billion won in fiscal 2012. Yesterday’s contract marks the second time Samsung bought a stake in a Japanese tech firm. On Jan. 30, it acquired a 5 percent stake in WACOM, a company with interactive pen technology for digital devices.

Sharp recently failed to clinch a deal with Foxconn Technology Group following almost a year of negotiations that began last March. It planned to sell a 9.9 percent stake, valued at around 132.5 billion yen ($1.42 billion), to the Taiwan-based manufacturer of Apple devices and the company’s founder Terry Gou. The talks stalled in part because the companies couldn’t agree on a price for the stock, Bloomberg reported earlier. In December Sharp agreed to sell as much as 9.8 billion yen of new shares to Qualcomm as they are set to co-develop a next-generation LCD.

The U.S. chipmaker has thus far purchased 4.9 billion yen of shares and will inject an additional 4.9 billion yen after the project is completed.

By Seo Ji-eun [spring@joongang.co.kr]