Business

Apple supplier Sharp to boost Samsung business in bid to stay viable

May 11, 2013

Sharp on Tuesday will set a goal of raising annual operating profit to US$1.5 billion by March 2016 on revenue of US$30 billion. — Reuters file picSharp on Tuesday will set a goal of raising annual operating profit to US$1.5 billion by March 2016 on revenue of US$30 billion. — Reuters file picTOKYO, May 11 — Sharp Corp, Japan’s leading maker of liquid crystal displays, will rely on expanding supplies of small panels to Samsung Electronics Co while still shipping screens to rival Apple Inc, in a bid to raise factory output levels and remain viable, three sources said.

In a midterm business plan it aims to release on Tuesday when it announces its latest earnings results, Sharp will set a goal of raising annual operating profit to US$1.5 billion (RM4.5 billion) by March 2016 on revenue of US$30 billion, the sources familiar with the plan told Reuters on condition they remained anonymous.

Japan’s TV pioneer avoided failure last year with a US$4 billion bailout from lenders including Mizuho Financial Group and Mitsubishi Financial Group. Sharp will borrow another ¥150 billion to help it repay a ¥200 billion convertible bond due in September, the sources said.

Those banks will dispatch personnel to take up senior management positions at Sharp, including a financial officer, which will also reduce its number of directors by 12 people, the sources said.

Sharp in October had to mortgage its offices and factories in Japan, including the one that makes screens for the Apple iPad and iPhone. It also had to agree to trim its workforce by 10,000 people and seek buyers for overseas assets including TV assembly plants in China, Malaysia and Mexico.

Deepening its ties with Apple’s South Korean competitor, Samsung Electronics, comes as growth at Apple slackens and orders for screens slow. Analysts project profit growth at the smartphone pioneer to average less than 5 per cent for the next decade compared with an average of 60 per cent over the past five years.

Sharp, which at the start of the year was forced to curtail production of 9.7-inch screens for Apple’s iPad, began limited panel fabrication for Apple’s next iPhone, with mass production slated to start in June, the sources said.

Samsung Electronics in March said it would inject US$103 million into Sharp in return for a 3 per cent stake in the Japanese company in a deal that secured it supplies of small LCD screens. Sharp, however, rejected a proposal by Samsung to buy its copier and printer business.

Sharp raised additional cash by agreeing in December to sell an equity stake to mobile chipmaker Qualcomm Inc, for US$120 million. The two companies also agreed to cooperate in developing new screens based on Sharp’s low power consumption IGZO panel technology.

The Japanese company will also try to expand sales of household appliances in Southeast Asia in a bid to underpin earnings over the next three years, the sources said.

Sharp will likely report a ¥500 billion net loss for the year ended March 31, sources earlier told Reuters, worse than the ¥450 billion deficit it forecast in November.

Its operating profit for the second half of its business year was ¥20 billion, compared with the company’s forecast for ¥13.8 billion, the sources added.

Since the start of the year, Sharp’s shares have gained 49 per cent, closing 6.4 per cent higher yesterday at ¥450. That compares with a 41 per cent rise in the benchmark Nikkei 225. — Reuters

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