David Hsieh, DisplaySearch:
The joint venture company will be capitalized by both companies, established in Taiwan, and in charge of the LCD TV panel and component business. Chimei Innolux, part of the Foxconn group, plays an important role in the relationship.
Sharp and CMI want to compete with the two largest LCD manufacturers Samsung and LG Display. Hsieh outlines four components of this joint venture:
- Joint procurement for LCD glass substrate, color filter, other components.
- Sharp’s technical expertise for CMI’s scale.
- Sharp’s large LCDs for CMI’s small ones.
- Foxconn to be Sharp’s LCD TV OEM.
I am not certain how joint procurement for LCD glass substrates will happen. Potential challenges might be procuring from different LCD glass suppliers, international exchange rates, who ultimately pays the bills and how joint procurement will show up on financial statements, etc.
The Sharp + Foxconn joint venture seems to be, at the core, the exchange of technical capabilities and very large LCD panels (Sharp) for breadth and smaller ones (CMI). The two companies seem to be harnessing the concept of competitive advantage. The biggest challenge with this idea is friction, the biggest being that pesky thing called politics.