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Another Setback for Sharp- Qualcomm’s Second Investment is Delayed

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Supply Chain Matters has previously noted a series of strategic investments being made from Qualcomm Hon Hai Precision and Samsung in Japan based LCD provider Sharp Corporation. The company literally reached the precipice of imminent bankruptcy before a rescue came forward.  The company is expected to again report a sizeable operating loss for its fiscal year ending this month. Further, nearly 200 billion yen in outstanding debt is scheduled to mature at the end of September.

Sharp provides consumer electronics OEM’s an important asset, being a pioneer in advanced manufacturing capabilities to produce leading edge electronic display devices for television, tablet and mobile phone devices.  Sharp has pioneered in LCD screen based technology, the latest being the use of high resolution indium gallium zinc oxide screen technology (IGZO) that is thinner and less power consuming than conventional displays. The latest investment from Samsung was extremely significant since it was not too long ago that both of these companies were strong market rivals, and the deal was seen as an indication that Sharp needed to exercise desperate measures to insure infusion of needed cash.

This week comes word that Qualcomm will not proceed with the second progress payment due at the end of March, as originally planned. According to Bloomberg and other published reports, the previously planned $53 million installment is being held because Sharp could not develop production technology for its Micro Electro Mechanical System displays, a previous milestone established to occur by the end of March.  The same report indicates that both companies are now working toward a June 30 deadline.

Qualcomm, who produces communications microchips for Apple’s mobility products, had previously agreed to invest $120 million in Sharp, including ownership of up to 5 percent of Sharp stock.  Qualcomm made its initial $60 million investment in December.

This latest report of investment delay again casts doubts on Sharp’s ability to secure needed cash and supply commitments to satisfy its bankers for the scheduled debt refinancing by the end of September.

To add more confusion, DigiTimes commented this week that although Sharp president Takashi Okuda hinted at a press conference on March 14 that talks over investments from Foxconn Electronics (Hon Hai Precision Industry) are already in a status of being cancelled, Foxconn has emphasized that the two sides are still in negotiation for the long speculated longer term equity investment.

Qualcomm and other strategic investors in troubled Sharp will continue to hold that supplier’s feet to fire in terms of expected milestones and assurances.  Thus, Sharp will face additional tough challenges in the months to come as it continues to shed assets and resources, while still delivering on strategic milestones. The open question is how long will these white knights remain before Sharp’s ship takes on too much water.

Bob Ferrari

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