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Talk of the Day -- Hon Hai-Sharp alliance vows to beat Samsung in 5 years

2012/06/19 19:39:20

Hon Hai Precision Industry Co., the maker of Apple Inc. products, confirmed a joint venture deal with Japan's Sharp Corp. on Monday.

Hon Hai Chairman Terry Gou said at the company's annual shareholders' meeting that the alliance with the Japanese company will allow Hon Hai to beat Samsung Electronics Co. in three to five years.

The new partnership will help Hon Hai upgrade its competitiveness in the cut-throat display panel business, in addition to gaining ownership of the Taiwanese flat-panel maker Chimei Innolux Corp.

Hon Hai announced in late March its acquisition of a roughly 10 percent stake in Sharp for US$800 million, which made it the Japanese company's largest shareholder.

Under the new deal, Gou agreed to acquire a 46.5 percent stake under his own name in Sharp's Sakai-based 10th-generation LCD panel plant, for an additional US$800 million.

The plant is the only facility in the world capable of mass producing 60-inch to 80-inch panels, according to Gou.

Part of the plant's assembly line will be moved to Hon Hai's headquarters in Tucheng, New Taipei, to create jobs in the area, he said.

Hon Hai will begin operating the Sakai-based plant on July 1.

The following are excerpts of a report in the Tuesday edition of the China Times on the prospects of the Hon Hai-Sharp alliance:

China Times:

Gou said he has made it a lifetime goal to defeat Samsung -- "a company with a track record of snitching on its competitors."

He was referring to Samsung's action in 2010 of snitching on four Taiwanese companies in an investigation by the European Commission on price-fixing in the flat panel industry.

A total fine of 433.92 million euros (NT$17.3 billion) was subsequently imposed to the four Taiwanese firms -- Chimei Innolux Corp., AU Optronics Corp., Chunghwa Picture Tubes Ltd. and HannStar Display Corp. of Taiwan.

Samsung was exempted from the investigation by serving as a "tainted witness."

Gou also urged consumers to wait for the launch of Apple's iPhone 5, saying that the new model will put Samsung's Galaxy III to shame.

With Hon Hai's marketing and manufacturing strengths and Sharp's key technologies, the two will be able to defeat their arch-rival Samsung, the chairman said.

"I respect the Japanese and especially like their execution and communication styles," Gou said, "Unlike the Koreans, they will not hit you from behind.”

He stressed that the pioneering technology at Sharp's 10th generation plant will give the company a three-year competitive edge over Samsung.

Under its new partnership with Sharp, an assembly line of television sets will be set up at Hon Hai's headquarters in New Taipei, he said.

Market sources suggested that the TV sets would be the upcoming Apple TV models.

Gou said he invested in the plant in his own name because some investors were concerned and he did not want that to drag down Hon Hai's stock prices.

The Sakai plant also has an exclusive agreement with Corning Inc., an American manufacturer of glass, on large panel supply, he said. His competitors will not be able to secure any such material if they wished to, he added.

Corning Gorilla Glass is already used on Apple devices such as the iPhone.

Gou said he plans to list the factory on the Taiwan stock exchange within three years. (June 19, 2012).

(By Ann Chen)
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