Sharp Corp. on Tuesday entered into agreement with Hon Hai Precision Industry Group (better known as Foxconn), the world's largest contract maker of electronics. The companies are set to collaborate in various business fields; for example, Foxconn will be able to buy up to 50% of large-size LCD panels and LCD modules that Sharp makes at its factory.

The situation on the market of electronics is causing different companies to collaborate to lower research and development (R&D), design and production costs. Today, many companies simply cannot afford buying new manufacturing equipment and keep production capacities utilized at 100%. As a result, for many years manufacturing of LCD panels, highly-integrated chips, memory and other commodities have been consolidating. For some time, Sharp has been producing LCDs in a joint venture it co-owned with Sony Corp. Going forward, it will operate its fab with Foxconn.

As it appears, Foxconn recognized high reputation of Sharp's LCD technology and decided to procure ultimately up to 50% of large-size LCD panels and LCD modules manufactured at the LCD panel plant in Sakai-city, Osaka, Japan.

Under the agreement, Sharp will issue 121.649 million new shares to Foxconn through third-party allotment. After the agreement goes into effect, Sharp Display Products Corp. (SDP) will be owned by Sharp (46.5%), Foxconn (46.5%) and Sony (7%). Sharp has rights to acquire the remaining stake from Sony. The LCD panel plant will be mutually managed by one company set by partner companies.

Sharp intends to allocate funds received from Foxconn to the investment for the new technology introduction, to increase mid-and long- term profitability, and to strengthen competitive edge in the global market.

The partnership allows Foxconn and Sharp company to establish a new business model, combining each company's strength, to launch cost competitive component and products fit to market demand by utilizing Sharp's potential for the development of one-of-a-kind components and products with Foxconn's mounting technology and cost competitiveness.

Separately, Foxconn said it would continue to own shares of another display maker, CMI (Chi-Mei Innoluxcompany).

Tags: Sharp, Foxconn, LCD, Business