Editorial: Sharp takeover to raise Taiwan’s profile

After years of moves backward and forward, Japan’s troubled Sharp Corporation seems finally to have reached a decision and put its future in the hands of one of Taiwan’s most prominent and outspoken tycoons, Terry Gou and his Hon Hai Precision Industry Co., Ltd.

While the latter said it would wait and first take a look at the documents before signing amid reports of a deal originating with the Japanese media, it looks like the four-year on-again off-again “romance,” as it has been dubbed in Taiwan, has finally reached a conclusion. A review of the deal, the largest case of Taiwanese investment overseas ever, is still pending with the Investment Commission under the island’s Ministry of Economic Affairs.

Sharp was once one of Japan’s global brands, often mentioned in one breath with Sony and Panasonic. However, the Osaka-based company has fallen on hard times, facing heavy debt and recurring losses, partly due to strong competition from South Korea and China for its liquid-crystal display television business. When a Japanese company hits dire times, the government and the business world will usually collaborate to provide a Japanese way out of the doldrums.

However, in this case, Sharp picked Hon Hai’s offer over one from a local government-backed rival, Innovation Network Corporation of Japan, reportedly because that contender was planning to take the company apart and sell off the parts it did not want.

In contrast, the Taiwanese company made four promises, according to a statement issued by Sharp Thursday. The Sharp brand name would continue to exist, the company would retain a level of independence, employees would be kept on and key technology would not be allowed to leak to outsiders, the Japanese company said.

Hon Hai will reportedly spend a total of 700 billion yen or NT$207 billion on the acquisition and restructuring of Sharp, of whose shares it will control about two thirds.

Gou’s company is known as one of the top suppliers of products to Apple Inc., being the main manufacturer of the iPhone, and owns massive factory complexes in China under the name Foxconn Technology Group.

“Foxconn to take control of Sharp in triumph for Terry Gou,” news agency Bloomberg News titled the news Thursday.

The tycoon has not stayed aloof from controversial remarks, lambasting Taipei City Mayor Ko Wen-je while also, more unexpectedly, recently praising former Taipei County Magistrate Su Tseng-chang of the Democratic Progressive Party in an unfavorable comparison with incumbent New Taipei City Mayor Eric Liluan Chu of the Kuomintang. Gou has been generally seen as a prominent KMT supporter.

While the deal is now pictured as a personal triumph for an outspoken billionaire, Gou is hardly popular in Taiwan, while over the past few years questions were asked about workers’ rights at his plants in China following several apparent suicides by workers there.

So while his political views and his brand of management might not enjoy widespread popularity in Taiwan at this time, his success in finally acquiring Sharp is likely to meet with a positive reaction in his country.

The takeover of a world-renowned Japanese brand by a foreign company is rare, with the most prominent example being car maker Nissan falling into the hands of France’s Renault.

Whatever the outcome of the deal, the takeover of such a well-known brand as Sharp by a Taiwanese company is certain to raise Taiwan’s international visibility. Despite Sharp’s troubled recent history, the name is still familiar to many overseas consumers.

Visit a European country these days, and civil servants at local government offices are highly likely to be using desktop computers from Taiwan’s “double A” brands, Acer or Asus. The release of new smartphones bearing the name HTC is widely reported by the European media, and any bicycle shop will sell Taiwan’s Giant brand.

Do most Europeans realize that all those brands hail from Taiwan? Maybe that’s not the case, and the average consumer cannot precisely tell the difference between products made by companies from Japan, South Korea or Taiwan. In addition, a significant amount of all those products might have been manufactured or assembled in China to benefit from that country’s low wages.

In any event, at present, brands from South Korea such as Samsung and LG for smartphones and Hyundai and Kia for cars dominate consumers’ consciousness around the world. In the past, Taiwan missed a chance to build up strong brands, relying on its manufacturing prowess to make products sold under foreign brand names.

While Taiwan is unlikely to make up lost ground or to bypass South Korea as the home of most new top world brands, it is not too late to follow suit. The more brands Taiwanese companies can push overseas, the more Taiwan will become more widely known as the technological trendsetter it already is.

However, Hon Hai should also heed warnings from the previous time a Taiwanese company tried to take over a prominent brand, when BenQ bought the cellphone division of German giant Siemens AG, an operation which soon faltered and ended in misery.

The case showed that it might be too soon to declare a triumph. A takeover is but one step in the march to improve an unhealthy company. Management and global economic development will show the way forward, and tough decisions are certain to face both Sharp and Hon Hai.

A mere takeover is unlikely to solve all problems facing the Japanese company, but if it is a Taiwanese corporation which succeeds in taking it back from the brink and restoring business confidence, Taiwan’s image will also receive a boost accordingly, especially in Japan.

Related Stories:
Japan’s Sharp accepts takeover, Foxconn not ready to sign
Reports say Japan’s Sharp accepts bid from Hon Hai

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