Hon Hai goes in at the Sharp end

There is some shuffling going on in the big manufacturing plants in the Far East.

Maker of Apple’s shiny toys, Hon Hai, has taken a 10 per cent stake in Japan’s struggling Sharp for about $806 million, in what analysts say is an effort to combat growing competition from Samsung.

According to Canada Business,  the cunning plan is that Sharp and Hon Hai will form an alliance in liquid crystal displays and other electronics sectors to cut costs. At the moment Sharp makes flat-screen TVs and LCD displays for TVs, game consoles, tablet computers and smartphones, appliances and other products.

Hon Hai gets Sharp’s cutting-edge technology to produce panels at its massive factories in China and integrate its iPhone and iPad supply lines.

A Hon Hai statement said the alliance will provide new growth opportunities for both companies.

Under the deal, Hon Hai will buy half of the LCD displays made at Sharp’s Sakai plant in Japan. Sharp will sell a 46.5 percent stake in that plant to Hon Hai chief Terry Gou and other investors. Sharp’s share of the plant will drop to 46.5 percent from 93 percent.

This leaves Sony a little high and dry because it has a seven percent stake in the Sharp plant and it is now effectively sharing a plant with its rival. It can take consolation that the main outfit that will be cross at the deal is Samsung, which now finds itself back footed.

Analyst David Hsieh of market research firm Display Search has pointed out that facing the strong rivalry of Samsung, the alliance of Hon Hai and Sharp appeared inevitable.

No one really blames Sharp for trying to sort out a deal with Hon Hai. Its bottom line really suffered as almost everything that went wrong with the tech industry seemed to harm the company. The last straw was the flooding in Thailand last year, which swamped several of its plants.