"Hong Xia Lian" is still difficult to produce: the two sides have not been able to negotiate

"Sharp has not fully utilized the opportunity to cooperate with Foxconn. Perhaps it should consider the 'JAL way'" (a banker who provides support for Sharp). The JAL method refers to the investment of a corporate regeneration organization funded by the government and the people after the application of the Japanese company's "Rejuvenation Law" by Sharp, like Japan Airlines, to help it rebuild its business. Whether this method will be adopted by Sharp is currently completely unknown. However, many bankers are worried that "even if they provide a loan of 500 billion yen, Sharp will not be able to survive."

Mizuho Corporate Bank and Mitsubishi UFJ Bank, which support Sharp, believe that Sharp must continue to survive with Taiwan's Hon Hai Precision Industry (known as Foxconn). Moreover, Sharp is also required to inject capital from Foxconn, the main company of Hon Hai Group. However, the capital injection conditions have not yet been re-determined. Cooperation has not taken shape.

High-level negotiations have not been carried out so far

The root cause of this state of affairs is that Sharp lacks determination. In particular, Sharp’s representative director, Okuda Takashi, should settle with Foxconn’s top operator, Terry Gou, after clearing the direction of business reconstruction.

However, Okuda has not met with Guo Taiming directly from the end of March to the beginning of September 2012, which announced cooperation with Hon Hai. As of September 24, there is still no news in this regard. Perhaps Okuda is afraid of Guo Taiming, who has a tough personality. The entire Sharp management team is also very negative about the cooperation with Hon Hai. It is clear that the other party needs to contribute, but always negotiates with Guo Taiming in Japan.

Note 1) Okuda said that he has tried to adjust the schedule several times. However, there seems to be no waiting for an idea to meet with Guo Taiming in Taiwan or the mainland. At the same time, it seems that the current method of discussing with Guo Taiming in Japan is taken for granted.

Foxconn’s Guo Taiming said that although he has always pursued the speed first principle, he will still wait for Sharp to make a decision. However, its inner heart seems to have been abandoned. "As long as the company's operating company, which is funded by Guo Taiming, and Sharp's cooperation in the LCD panel business, it is enough. The other parts that Foxconn needs can be compensated by the cooperation of other Japanese companies that make faster decisions" (Foxcon employees). If this is the case, Foxconn's capital contribution will definitely be lower than the original plan of 66.9 billion yen.

Sharp is in urgent need of funds

What kind of differences have there been between Foxconn and Sharp at the request? As far as the conclusion is concerned, the two companies do not seem to have a gap that cannot be crossed. All that is needed is Sharp's quick decisions and actions.

Sharp has two main requirements. The first is to require Foxconn to agree on investment conditions before the end of September 2012. It is estimated that the shareholding ratio is less than 10% as originally planned, and the stock price is calculated based on the average value of a certain period before the investment is implemented. The second is to require Foxconn to acquire Sharp's television factories in Nanjing, Malaysia and Mexico (along with about 5,000 employees).

Sharp hopes that the second requirement will be able to pay cash. The background is that Sharp's small and medium-sized LCD panel business, which is regarded as the pillar business, is not smooth enough.

The second plant of Sharp Kameyama, which produces IGZO-type liquid crystal panels, has a operating rate of only about 30%. The reason is that the panel uses the indicator for the "iPad", but the iPad is not as popular as expected. The situation at the first factory in Kameyama is even more severe. Not only for the "iPhone 5" In-cell type LCD panel (with touch sensor, LTPS type) mass production shipments lag behind Japan Display Company and South Korea LG Display Company, and "the yield is only 15%" (residence in Taiwan) Industry analyst).

Sharp suffered serious losses in these areas. If the cooperation with Foxconn's capital fails, Sharp can only sell the profitable business such as the digital one machine to the investment fund of the bank in order to obtain cash. For this reason, Foxconn is very likely to meet the above two requirements of Sharp, but it will be affected by Foxconn's requirements.

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