Hon Hai, Sharp nearing large deal: Gou

EXTENSIVE COOPERATION::Terry Gou said the two companies would consider building joint LCD manufacturing plants overseas as well as producing smart home appliances

By Lisa Wang  /  Staff Reporter

Thu, Jun 09, 2011 - Page 12

Hon Hai Precision Industry Co (鴻海精密), which manufactures iPhones and iPads for Apple Inc, said yesterday it was discussing with Sharp Corp an extensive cooperation agreement with the Japanese firm after reaching an initial consensus to jointly purchase components used in LCD panel manufacturing in an attempt to compete with South Korean rivals.

As part of their first-stage partnership, the companies would consider building joint overseas manufacturing plants to tap into the emerging BRICS — Brazil, Russia, India, China and South Africa — markets and further boost technological exchanges, Hon Hai chairman Terry Gou (郭台銘) told reporters after the firm’s annual shareholders’ meeting.

Eventually, that would lead to a deeper partnership in developing new flat-panel technologies to reduce investment risk, as LCD panel companies in Japan and Taiwan lacked the strong support that LG Display and Samsung have received from the South Korean government, Gou said.

“Not only LCDs, we are in a series of talks with Sharp to team up in many different directions,” Gou said. “The cooperation with Sharp will be extensive.”

The companies also talked about teaming up to produce smart home appliances, Gou said, adding it took more than a year to wrap up those initial agreements. Hon Hai already manufactures some products for Sharp, he said, but declined to reveal further details of the business plan.

Gou said Hon Hai was also in talks with more than 10 other Japanese companies, including Hitachi and Canon, about tie-ups.

“As a lot of Japanese companies are withdrawing from manufacturing, I think we have a lot of business opportunities in Japan,” he said.

Gou did not make clear whether Hon Hai’s LCD manufacturing arm Chimei Innolux Corp (奇美電子) would be at the center of the deal with Sharp.

Yesterday, Gou also confirmed the company planned to invest US$12 billion in building an electronic components supply chain in Brazil over the next three to five years. Gou also said the company planned to manufacture tablet devices there after the Brazilian government responded positively to his call for zero tariffs on tablet exports.

SPIN-OFF PLAN NEARS

Gou also talked about the company’s progress in spinning off some businesses, including its digital camera business.

He said the company would unveil a clearer blueprint for investors after reaching a conclusion at the next two board meetings.

Hon Hai prefers a plan to transform itself into a holding company that operates subsidiaries in different businesses, Gou said.

He declined to comment whether the spin-off plan would extend to efforts by Chimei Innolux to separate its touch panel and handset device panel businesses from its core PC and TV panel businesses amid growing speculation the plan had been thwarted because of disagreements among the board of directors.

STICKING TO NOTEBOOKS

Gou also said Hon Hai would not give up on its laptop computer manufacturing business after the Chinese-language Commercial Times newspaper reported on Wednesday last week that Hon Hai was under increasing pressure to back off the market on rising pricing competition, citing notebook computer maker Compal Electronics Inc’s (仁寶電腦) president Ray Chen’s (陳瑞聰) remarks.

“It would make no sense for us not to make notebooks, since we make almost all the key parts,” Gou said. “If only two laptop companies were to survive, Hon Hai would be one of them.”

Hon Hai shareholders yesterday approved a proposal initiated by shareholders to increase stock dividend to NT$1 a share, from NT$0.5 proposed by the board, based on the company’s net income of NT$77.15 billion (US$2.69 billion), or NT$8.01 a share, last year.

The delivery of NT$1 per share in cash dividend remained unchanged.