Taiwan’s Hon Hai Group invests in SHARP


Crunch time? – reviving Japan’s huge electrical/electronics sector

SHARP fighting for survival

SHARP (6753) last month forecast a record YEN 290 Billion (US$ 3.5 Billion) loss for this financial year – more than 1/2 of SHARP’s market cap, and SHARP’s new Sakai factory is reported to work at 1/2 capacity.

Taiwan’s Hon Hai Group (which includes Foxconn, which is known to assemble Apple’s iPhones and iPads), and founder Terry Gou invest about YEN 133 Billion (about US$ 1.6 Billion in SHARP:

  1. Hon Hai Group will invest YEN 66.9 Billion in newly issues SHARP-shares corresponding to a 9.9% holding, and will become SHARP’s largest share holder
  2. Hon Hai’s Chairman Terry Gou and related investment companies will buy 46.5% of SHARP Display Products Corporation for YEN 66 Billion reducing SHARP’s holding from 93% to 46.5% (note that SONY preferred not to increase its holding in SHARP Display Products Corporation, which operates the Sakai factory)
    click below to watch video clip (initial plan for the interview was to discuss the ELPIDA bankruptcy, but at the last minute we switched the interview to the Hon Hai investments in SHARP, because of the potentially much bigger impact on Japan)

There is a wide range of implications

  • Clearly the business models which have sustained Japan’s huge electrical sector for several decades have reached end-of-live, and restructuring as well as much more opening to the outside, non-Japanese world are becoming more and more urgent. Much of our Post-Galapagos Working Group efforts last year were devoted to this urgent need.
  • SHARP’s financial problems may not be solved yet, and further investments by Hon Hai or others might well be on the horizon
  • APPLE – although not directly involved in the transaction – is the center of power. With the investment Hon Hai may hope, that a combination of Hon Hai and SHARP may become a stronger supplier to APPLE than each company alone. SHARP has been reported to use Hon Hai’s investment to increase production of LCD displays for smart phones, and tablets.
  • Comparing market capitalization, it’s clear who the stronger partner is:
    • SHARP = US$ 6.6 Billion market cap
    • Hon Hai = US$ 39 Billion market cap

For data and detailed analysis download our report on:

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Tokyo PRO: LSE’s Tokyo AIM stock market rebirth under TSE alone?

Tokyo PRO: NIKKEI reports that LSE fails in the same way in Japan as NASDAQ 10 years earlier. London Stock Exchange withdraws from Tokyo AIM and quits Japan

Tokyo-AIM (the stock market joint venture between Tokyo Stock Exchange and London Stock Exchange) seems to be heading along a similar road as NASDAQ-Japan about 10 years earlier, according to an article in NIKKEI this morning (morning edition of March 26, 2012).

Nikkei: “Tokyo Stock Exchange has learnt enough from the London Stock Exchange to set up a similar market on its own”

Nikkei reports this morning that “Tokyo Stock Exchange has learnt enough from the London Stock Exchange to set up a similar market on its own. TSE plans to improve the rules of its own new market, so that TSE can create a more welcoming market”.

Similar to NASDAQ ten years earlier

Reminds me of NASDAQ-Japan almost exactly 10 years ago:

At the end of 2002 I met with one of my friends, until a few days earlier CFO of NASDAQ-Japan, which terminated operations in Japan on October 15, 2002. I asked him as many questions as I could to build myself a good picture of why NASDAQ had not been successful in Japan, and why NASDAQ decided to terminate its operations in Japan. (After our conversation he offered my small company the used office furniture of NASDAQ-Japan at a good price, had I accepted this offer, my company’s people would all be sitting on x-NASDAQ-Japan chairs and desks…)

NASDAQ initially entered Japan in a joint-venture with Softbank, and built the NASDAQ-Japan stock exchange in cooperation with the Osaka Stock Exchange (OSE). When NASDAQ decided to terminate operations in Japan in October 2002, about 100 companies were listed on NASDAQ-Japan.

NASDAQ Japan becomes Hercules and succeeds

The stock market built up by NASDAQ in Japan became HERCULES (full name: Nippon New Market Hercules) when NASDAQ exited Japan, and in December 2008 Osaka Stock Exchange acquired JASDAQ, and October 12, 2010 Hercules, JASDAQ and NEO were merged to form New-JASDAQ. This year, 2012, there were 7 IPOs on the New-JASDAQ, and about 1000 companies are currently traded on New-JASDAQ.

Interesting to see that NASDAQ-Japan’s market and probably also the market to evolve now from TOKYO-AIM are success stories from the OSE and the TSE points of view, while NASDAQ and now apparently London-Stock-Exchange AIM withdrew from Japan.

Lots to learn here for foreign companies with complex high-tech businesses such as stock exchanges entering and building business in Japan.

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