Financially troubled Sharp Corp. is set to attempt a comeback under the umbrella of Taiwan's Hon Hai Precision Industry Co. The roughly 660-billion-yen takeover will make Sharp Japan's first electronics giant to pursue a turnaround under foreign ownership.
Many Japanese appliance and electronics manufacturers have had to swallow oceans of red ink or been forced to spin off some of their money-losing divisions over the past decade, while their counterparts in emerging economies have dramatically increased their competitiveness. These trends forced Sharp management to take the unprecedented step of turning to a foreign buyer.
Sharp's worsening financial situation surfaced when it settled its accounts for the 2008 business year, posting its first loss since it went public. This was largely because the market prices of liquid crystal display (LCD) televisions were declining. Sharp had invested heavily in its LCD business, counting on it for much of the company's profits -- profits that did not materialize.
However, the situation of Japan's appliance and electronics industry had started to shift in 2000, long before Sharp began bleeding red.
In spring 2003, Sony Corp. announced that it had drastically revised its profit forecast downward, causing the so-called "Sony Shock" to stock markets. Sony's video camera and computer businesses rapidly lost momentum and the company has still not recaptured its past glory. In fiscal 2004, Sanyo Electric Co. also fell deeply into the red, and then disappeared after it was taken over by Panasonic Corp.
Panasonic also suffered deficits totaling some 1.5 trillion yen in fiscal 2011 and fiscal 2012, forcing it to stop paying share dividends and to restructure the businesses of its entire corporate group.
Toshiba Corp.'s business performance had appeared stable, but accounting irregularities that surfaced recently have revealed that the company had been covering up its financial troubles.
While almost the entire Japanese electronics industry slumps, Chinese, Taiwanese and South Korean companies have grown steadily. Japanese manufacturers' strategy of offering high-quality and multifunctional products was undercut by their Chinese, Taiwanese and South Korean competitors' low prices.
China-based Lenovo Corp., which acquired the personal computer division of the U.S.'s IBM Corp. in 2004, has enjoyed the world's largest share of the PC market for the past three years. China's Haier Group, which purchased Sanyo Electric's refrigerator and washing machine divisions, decided this past January to buy the home electric appliance business of the U.S.'s General Electric Co. for approximately 600 billion yen. South Korea's LG Electronics Inc. and Samsung Electronics Co. are the dominant players in the world market for next-generation flat-screen TVs with organic light emitting displays (OLED).
Hon Hai, which assembles iPhones for the U.S.'s Apple Inc. and whose consolidated annual sales amount to some 15 trillion yen, views these emerging country manufacturers as its rivals. As such, Hon Hai is expected to take advantage of Sharp technologies to gain a competitive edge in global product development.
Sharp, whose core LCD-related business had been sluggish, was unable to spin off unprofitable divisions and concentrate its business resources on money-making projects, as GE has. Sharp's decision to put itself under Hon Hai was an inevitable choice, and the consequence of the history of the rise and fall of the world's appliance and electronics manufacturers.