Sharp, a leading suppler of displays to Apple, said yesterday it would form a US$2.9 billion alliance with the state-owned company China Electronics Corp, which included an agreement by the Japanese electronics giant to license its advanced power-saving IGZO screen technology.
The new venture will be 92 per cent owned by CEC, which supplies equipment to China's military. The venture will set up a liquid crystal display plant with the goal of mass-producing panel displays for televisions, notebook computers and tablets in 2015.
Licensing IGZO, or indium gallium zinc oxide, displays fits into a strategy by cash-strapped Sharp to leverage its technology to bolster its finances. The firm signed a pact with Qualcomm in December last year, selling the US company an equity stake for US$120 million and agreeing to develop new screens based on IGZO technology.
IGZO screens boast power consumption as low as a tenth of conventional LCDs, high resolutions and faster reaction speeds.
While a deal to license the technology to a Chinese military-linked firm may raise eyebrows, Sharp does not exclusively own the technology, only being the first to commercialise it.
The agreement, which is a revised version of one agreed to with CEC in 2009, may instead represent a retreat by the Chinese firm to win access to Sharp's more advanced 10th-generation LCD manufacturing techniques. CEC is planning to build an "8.5th-generation" facility.
Sharp is the only panel maker in the world to have built a 10th-generation factory able to fabricate liquid crystal sandwiched in glass sheets thinner than a credit card that are 3.13 metres long by 2.88 metres wide. Smaller, 8.5th-generation sheets measure 2.2 metres by 2.5 metres.
In November, CEC blamed deteriorating ties between Japan and China over their territorial dispute in the East China Sea for shelving co-operation with Sharp to build a 10th-generation facility.
Sharp says no such agreement ever existed.
Yesterday's deal, including the construction of the 8.5th-generation factory in Nanjing, represents one of the highest-profile transactions between a Chinese firm and a Japanese firm since tensions flared last year over the chain of islands.
A Sharp spokesman declined to say how much in royalties the firm expected to receive.