Sharp Seeks to Spin Off LCD Panel Unit
Troubled Japanese electronics provider plans to ask government-supported investment fund for help
TOKYO—Sharp Corp., the troubled Japanese electronics provider, is moving to spin off part of its panel-making unit and plans to ask a government-supported investment fund for help, several people familiar with the matter said.
The unit to be spun off makes small- and medium-size liquid crystal display screens for smartphones. Demand for the screens is growing, but Sharp has struggled to compete with South Korean providers such as LG Display and domestic rival Japan Display Inc., which has been marketing its panels aggressively to makers of low-cost handsets in China.
As part of the plan, Sharp is seeking a capital injection from Innovation Network Corp. of Japan, a fund overseen by the Ministry of Economy, Trade and Industry that was created to support the country’s electronics industry. The fund previously invested in Japan Display, which was created from a merger of panel operations of several other Japanese electronics giants.
A Sharp spokesman said the company is considering various restructuring options including those for the panel business, but “has not made any decisions.”
Sharp hopes the spinoff plan, along with staff reductions and other cost cuts, will help secure new financial aid from lenders. The banks already hold more than ¥600 billion ($5 billion) in Sharp debt.
Sharp said in February it would post a loss of ¥30 billion, instead of the ¥30 billion profit it had previously expected, for the business year ended March 31. Along with the panel business, Sharp’s domestic consumer electronics business has struggled of late. It has been hurt by the weak yen, because much of what it sells in Japan it makes overseas.
Sharp is putting the finishing touches on the broader restructuring and plans to unveil it in May. But a person familiar with the situation said the company might announce the spinoff before then.
Sharp hopes to retain control of its panel-making business even after cash injections by external parties, but analysts say the step could be a prelude to industrywide consolidation, especially if Innovation Network Corp. gets involved. When the fund spearheaded the creation of Japan Display in 2012 from LCD units of Sony Corp., Hitachi Ltd. and Toshiba Corp., Sharp declined to join.
Besides the Japanese fund, Foxconn—the Taiwanese electronics manufacturer officially known as Hon Hai Precision Industry Co.—has been exploring investment and partnership opportunities possibly involving Sharp. The Japanese company has said the door is open, but under a previous commitment to purchase Sharp’s shares at ¥550 a share. They closed Friday at ¥231.