Foxconn's $3.5 billion bet to keep up with Apple

Thu Mar 31, 2016 8:24am EDT
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By Se Young Lee

SEOUL (Reuters) - With its acquisition of Japan's Sharp Corp (6753.T: Quote), Foxconn aims to gain access to promising technology for high-end OLED screens likely to be used in future devices from Apple Inc (AAPL.O: Quote), the electronics assembler's biggest customer.

But even with Foxconn's backing, Sharp faces a tough challenge to catch up with rivals already looking ahead to more advanced display panels such as 'foldables'.

And industry experts also say Chinese display makers such as BOE Technology Group (000725.SZ: Quote) and Tianma Microelectronics 000050.SZ are, in turn, fast catching up on OLED, or organic light emitting diode, technology.

Foxconn - formally known as Hon Hai Precision Industry Co (2317.TW: Quote) - already has a range of flat screen businesses, and the addition of Sharp, which supplies screens for iPhones, will make it the world's top liquid crystal display (LCD) panel maker.

While loss-making Sharp owns core technologies required to produce OLED, it has never commercially produced it, and there are risks that others may be faster and nimbler.

"By the time Sharp ramps up OLED, Chinese panel players may have caught up, which means it's not just Hon Hai in this game," said Vincent Chen, analyst at Yuanta Investment Consulting in Taipei. "Hon Hai's investment risk with the Sharp deal is relatively bigger."

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The logo of Foxconn, the trading name of Hon Hai Precision Industry, is seen on top of the company's headquarters in New Taipei City, Taiwan March 29, 2016. REUTERS/Tyrone Siu