Sharp Corp. said Dec. 4 it has formed a capital and business alliance with U.S. chipmaker Qualcomm Inc. to co-develop next-generation displays for smartphones.
Qualcomm will invest up to 9.9 billion yen ($120 million) in the struggling Japanese electronics maker through a third-party allotment.
But the tie-up, mainly geared toward technological development, is not expected to improve Sharp's earnings, at least over the short term.
In March, Sharp formed a capital and business tie-up with Taiwan's Hon Hai Precision Industry Co., but Hon Hai is behind in a planned 67-billion-yen capital injection due to Sharp's sagging stock price.
Negotiations have been prolonged to review the company's investment conditions.
For much-needed capital boosts, Sharp has been negotiating with major chipmakers and information technology firms, such as Intel Corp. of the United States. Qualcomm is the first company to reach an agreement.
Sharp said it was approached by Qualcomm, which is interested in Sharp's cutting-edge IGZO display technology. The U.S. maker is aiming to commercialize a next-generation display called MEMS that is said to offer high color reproducibility and low power consumption.
Sharp will establish facilities in its LCD panel plant in Yonago, Tottori Prefecture, to start studies this month for commercializing new displays.
Sharp has already been cooperating on basic research with Qualcomm's display-development subsidiary for about a year and a half.
Qualcomm is expected to provide the capital in two stages, half on Dec. 27 and half on March 29. Sharp is expected to issue equity to Qualcomm at 164 yen per share in the year-end first round.
After the investment is completed, Qualcomm will hold a stake of around 5 percent in Sharp, based on simple calculations, likely making it the company's largest shareholder.
But Qualcomm could halt the planned research and investment mid-course, depending on the progress of the development and other factors.
Sharp's capital adequacy ratio fell to 9.9 percent at the end of September due to its poor performance, and the 9.9-billion-yen investment will raise that rate only a little, meaning Sharp will need further capital increases.
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