OSAKA--Sharp Corp. decided to sell one of its U.S. subsidiaries and is discussing an alliance with Intel Corp. after banks said the ailing company’s restructuring plans were insufficient, sources said.
The U.S. subsidiary, Recurrent Energy LLC, operates solar power businesses across North America. Sharp acquired the company for $305 million (25 billion yen) in 2010, but will sell it after just two years.
On Aug. 2, Sharp revised downward its forecast for fiscal 2012 to a net loss of 250 billion yen and announced downsizing measures, including slashing 5,000 jobs in Japan and abroad.
Those measures were to be included in a management reconstruction package drawn up by the end of this month, but the banks that Sharp has turned to for financing called for further revisions, the sources said.
The banks said a new package is needed to ensure that Sharp can post profits even without investments from Taiwan's Hon Hai Precision Industry Co. or if Sharp’s performance falls short of expectations, the sources said.
The banks are expected to approve the revised package and agree to extend 360 billion yen in additional loans to the electronics giant.
With the loans, Sharp plans to return to the black in the second half of fiscal 2012 even in the absence of Hon Hai's investment.
As negotiations with Hon Hai over its proposed stake in Sharp have bogged down, Sharp has entered business alliance talks with Intel of the United States in hopes of reviving its mainstay small and midsize liquid crystal display (LCD) panel operations.
According to company sources, Sharp recognized that there is a limit to what it can achieve only through the downsizing measures.
Specifically, Sharp is seeking an alliance with Intel on high-performance LCD panels for smartphones that use IGZO, or high-definition oxide semiconductors that consume low power.
Sharp manufactures IGZO panels at its Kameyama Plant No. 2 in Mie Prefecture.
The company is also considering a similar tie-up in the field of LCD panels for Windows 8-compatible personal computers, the sources said.
Sharp has converted its two plants in Kameyama into production lines for small and midsize LCD panels for smartphones and other mobile devices. Both the utilization rates and profitability have declined at Kameyama Plant No. 2, the larger of the two, due to a lack of buyers.
"Developing new demand is our largest mission," a senior Sharp executive said.
Sharp asked Hon Hai, which has a global roster of customers, to help develop new sales channels for small and midsize LCD panels. But the prospects for an agreement remain murky amid the prolonged talks on the specifics of Hon Hai's investment in Sharp.
At Sharp's Sakai Plant in Osaka Prefecture, which manufactures large LCD panels for televisions, the utilization rates rebounded to between 80 percent and 90 percent in July thanks to a contract that obliges Hon Hai to buy half of all panels that Sharp produces there.
Sharp's management is hoping for similar improvements in Kameyama to help revamp the company's LCD panel business, which is expected to post an operating loss exceeding 100 billion yen for fiscal 2012.
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