The investment by Samsung Electronics in struggling television-maker Sharp signals the South Korean company is accelerating a shift towards higher-end sets using OLED technology as it tries to widen the gap with rival Sony.
Samsung, the world's top seller of televisions, will acquire 3 per cent of Sharp for 10.4 billion yen (HK$856.8 million) to secure liquid crystal displays for smartphones and televisions. It is emphasising organic light-emitting diode technology that offers sharper, brighter images while consuming less power.
The firm, with 37.4 trillion won (HK$265.5 billion) of cash, is investing in OLEDs to boost sales of the ultra-thin sets that typically cost three times more than LCD models. Samsung and Korean rival LG Electronics are depending on the new technology to counter slowing global demand for televisions.
"Samsung is reducing its LCD production and shifting its focus more to OLED technology," said Kim Sung-in, an analyst at Kiwoom Securities. "LCDs aren't making big money anymore."
It is paying 290 yen a share for its stake in Sharp, or 15 per cent less than Wednesday's closing price. The share sale will close on March 28, according to the filing.
Foxconn Technology would continue talks with Sharp on a proposed investment, the Taiwanese electronics maker said.
Sharp, which makes screens for Apple's iPhones and iPads, would use 6.9 billion yen of the proceeds to buy new LCD technologies and 3.23 billion yen for capital expenditure related to mobile devices, it said.
Samsung planned to start selling OLED sets in the first half of this year as sales in the global premium television market were expected to grow 30 to 40 per cent this year, Kim Hyun-suk, the head of the television operations, said last month.
LG said in January it started selling a 55-inch OLED set in Korea for 11 million won, giving it a head start over Samsung in mass-marketing the technology. The firm would expand OLED television sales to North America, Europe and other Asian markets in the first quarter, it added.
Samsung sold more than 51 million flat-screen televisions worldwide last year, while LG sold about 30 million. Sony, the No3 maker, projects selling 13.5 million units this year.
"Samsung is heavily investing in [OLEDs] as their next-generation television panel," said Fumiyuki Nakanishi, a senior strategist at SMBC Friend Securities. "It's natural for them to partner with Sharp so that they'd know Sharp's next move."
Sharp is trying to raise funds after forecasting a record full-year loss of 450 billion yen.
The company lost 55 per cent of its market value last year and warned in November that there was "material doubt" about its ability to survive after haemorrhaging 103 billion yen in cash from operations in the fiscal first half.
In December, it turned to Qualcomm, the biggest maker of mobile-phone chips, for as much as 9.9 billion yen in new capital.