DJ: Samsung To Take 3.0% Stake In Sharp For Y10.4bn

By Min-Jeong Lee and Juro Osawa

SEOUL--Samsung Electronics Co. said Wednesday it has signed a deal to buy a 3.0% stake in Japan's embattled Sharp Corp. (6753) for 10.4 billion yen ($110 million), a move that could reshape major technology alliances.

The investment comes as Sharp, a supplier to Apple Inc., scrambles to raise funds and secure customers for its liquid-crystal displays in an ongoing effort to prove to its bank lenders that its business prospects remain solid.

"The investment is set to fortify the partnership between Samsung and Sharp and also lay a firm foundation for Samsung to secure a steady supply of LCD panels from diversified sources," the South Korean company said in a statement.

Samsung will have no involvement in Sharp's management. The two companies are expected to complete the deal later this month.

Sharp's decision to turn to Samsung -- once its most feared rival in LCD panels and television sets -- signals the desperate situation facing Sharp. It needs capital injections to secure its balance sheet after a planned 66.9 billion yen investment from Taiwan's Hon Hai Precision Industry Co. fell through last year when Sharp's business prospects and share price worsened.

For cash-rich Samsung, the move will help the company get a stable supply of LCD screens for TV sets from Sharp. The Japanese company is the only LCD manufacturer that currently operates an advanced manufacturing facility -- in a separate partnership with Hon Hai -- capable of turning out TV panels from the industry's largest sheets of glass. This allows Sharp to lower the manufacturing costs of TV screens larger than 60 inches. Samsung may also rely on Sharp to supply panels for tablets.

Samsung has been shifting its focus to produce a different kind of screen technology called organic light-emitting diode, or OLED, which is brighter and more energy efficient than LCDs. Analysts said a deal with Sharp would help Samsung gradually outsource LCD production more, while Samsung tries to focus more on OLED production.

Samsung's involvement in Sharp could also impact the Japanese company's relationship with Apple, its major customer, industry observers say. Sharp has been a supplier of iPhone screens for many years and has also supplied iPad screens. Selling more displays to Samsung could help Sharp reduce its dependence on specific customers or products.