Hon Hai joins Sharp in Gen 10 display fab

March 28, 2012 — Strong competition in the TV market and low display panel orders have pushed Sharp’s Gen 10 display panel fab in Sakai, Japan, to low capacity utilization rates. Reuters reports that Sony, the original partner in the Gen 10 joint venture, will not make any further investments in the plant. Now Hon Hai/Foxconn will invest JPY 66.4 billion, (US$0.8 billion, a 46.5% share) as joint venture capital into Sharp, reports NPD Displaysearch.

The Gen 10 fab is now a subsidiary called Sharp Display Product. Shareholders will now be Sharp 46.5%, Hon Hai 46.5%, Sony 7%. Sharp and Foxconn will run the Gen 10 together as a company and Foxconn will equally share its capacity. Sharp will outsource more liquid crystal display (LCD) TV OEM assembly business to Foxconn. The relationship could improve economies of scale for both companies, bringing down costs.

NPD Displaysearch’s David Hsieh suggests that Sharp needs the support to both improve its financial situation and find a solution for its Gen 10 capacity. Hsieh says Hon Hai is also taking an important step to enlarge its LCD TV OEM business — especially in 40", 60", and 70" panels — and strengthen its position against Korean counterparts, especially Samsung and LG, in the worldwide TV market. Samsung and LG operate mainly in-house LCD panel production. Samsung and LG Electronics are the world’s No.1 and No.2 LCD TV brand with 18.8% and 12.1% shares in 2011, respectively, according to DisplaySearch reports. Meanwhile, LG Display and Samsung LCD accounted for 27.9% and 24% in large area TFT LCD shipment in 2011, respectively.

Sharp and Hon Hai partnered in July 2011 for LCD TV panel technology, with a license to Foxconn and its LCD affiliate Chimei Innolux, particularly in wide view angle and high transmittance processes. Sharp also planned to buy some mainstream 32" and above LCD TV panels from Chimei Innolux while it refocused its Gen 8 for high-end mobile PC panels, and Gen 10 for 60" and above ultra-high resolution panels. However, Sharp’s capacity utilization problems at the Gen 10, and the decreasing costs of larger panels, have dragged on Sharp’s financials.

Sharp’s Gen 10’s glass substrate input is about 35K/M in Q1 2012 and the major products are 40" (15%), 60" (44%) and 70" (41%) panels, which are not currently supplied by Hon Hai’s Chimei Innolux.

Foxconn is planning to make 9.5M LCD TVs in 2012: 8M for Sony and 1.5M for Sharp. Foxconn acquired Sony’s global LCD TV assembly lines a few years ago and provides manufacturing for Sony.

The alliance between Foxconn and Sharp also moves Sharp towards external customers, which could improve utilization rates. While past key customers Sony and Philips have sourced elsewhere, Sharp could gain Vizio and other new customers thanks to Foxconn.

Sharp may also license its “Sharp” brand to Foxconn, instead of or in addition to contract manufacturing, Foxconn may also design and sell its own products with the Sharp brand worldwide. Sharp could also transfer some advanced display manufacturing technologies to Foxconn: high resolution low temperature polysilicon (LTPS), oxide TFT, color filter, etc. Foxconn is currently building a Gen 6 LTPS fab in China for high resolution mobile phone panels, and may require more technical support.

The partnership could also impact Apple, as Foxconn is the largest system integrator iPads and iPhones, and Sharp is a major panel supplier for these devices. Also read: Apple tops semiconductor buyer list in 2011

Learn more in David Hsieh’s NPD DisplaySearch Blog at www.displaysearchblog.com.

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