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Sharp, a supplier to Apple and Xiaomi, is under financial pressure. Photo: Reuters

Taiwan's Foxconn said to be near deal for control of Sharp's LCD business

Foxconn Technology Group has signed a letter of intent to buy a stake in Sharp’s liquid-crystal display business in a deal that would give Foxconn management control as the Japanese electronics maker spins off the unit, according to people familiar with the plan.

The companies still need to complete price negotiations and due diligence, and there is no guarantee a final deal will be reached, said the people, who asked not to be identified because the plan hasn’t been announced.

Taipei-based Foxconn would get management control under the preliminary terms, though it won’t necessarily hold a majority of equity in the unit, which makes display panels for mobile phones and tablets, they said.

Sharp, a supplier to Apple and Xiaomi, China's top smartphone vendor, is under financial pressure to reach a resolution for the LCD business after years of negotiations without result.

Sharp said on Friday it would miss its first-half profit forecast, sending shares down as much as 10 per cent.

Sharp shares pared declines to a drop of 5.8 per cent at 11:05 am in Tokyo trading after the Foxconn report.

Foxconn wants to model this deal on chairman Terry Gou’s personal investment in Sharp’s Sakai Display operations in 2012, which resulted in the Taiwanese company having management control over the LCD factory, one of the people said.

Hon Hai Precision Industry is Foxconn’s largest unit and the world’s biggest maker of iPhones. The company also makes iPads, Microsoft’s Xbox console, and personal computers for Hewlett-Packard and Dell.

Hon Hai gets about half its revenue from Apple and is seeking to expand beyond assembly to offer components, including displays and semiconductors.

Sharp first agreed to sell a stake to Hon Hai in 2012, yet talks foundered over disagreements on price and the Taipei-based company’s role in management. Gou later said he’d been "fooled" in his discussions with Sharp, and the two sides decreased exchanges.

Gou bought a minority stake in Sakai Display, which makes larger panels used in televisions.

Chu Wen-min, a spokesman for Foxconn, declined to comment. Yoshifumi Seki, a spokesman for Sharp, said the company is considering a variety of options for the LCD business and declined to comment on Foxconn.

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