The collapse of shares of Sharp, the Japanese electronics giant might just have an impact on Apple and its upcoming iPhone 5 if analysts are to be believed. Sharp, which fell to its lowest in 37 years, supplies several components for various Apple products and the two companies are connected by another corporation called Foxconn Technology Group which handles the assembly work for Apple. What is more critical is that Foxconn may be vital to Sharp’s survival and the continued production of Apple’s products.
Sharp’s shares fell after the company announced a possible loss of 250 billion yen ($3.2 billion) for this year. This amount is larger than the company’s valuation and the slump allowed Foxconn to announce on August 3rd that it would be paying less for the 9.9% stake in the company. However, the good news is that Foxconn will be going ahead with the deal. The main reason that the Taiwanese assembler wants to take over Sharp is to gain access to the technology that develops components for Apple, which is its biggest customer. The deal, if it goes through is going to perhaps help Sharp escape bankruptcy. Moreover, this will help Apple as it will not need to find a new supplier for the components.
Analysts believe that if Sharp closes shop, it is going to drastically affect Apple as it is one of the largest suppliers of Apple’s components. The investment to save Sharp is being made by Terry Gou whose original plan involved taking over the Sharp stake for 133 billion Yen while using a further 66 billion Yen to take over one of Sharp’s affiliates. Now, it appears Gou wants to renegotiate for a better price considering the slump.
It is in Apple’s best interests that the deal goes through smoothly as the stakes are quite high. While the release of a new iPhone is imminent, there is also the possibility of an iPad mini and Apple TV, all of which are likely to improve the company’s profits after it fell short of expectations this quarter. Gou is confident that the deal with Sharp is going to help his company beat Samsung as the world’s largest manufacturer of phones, flat panels and flat screen televisions. While some analysts are skeptical that Apple will order more components from Sharp, it seems that there might be no choice at all considering the urgency with which Apple needs to proceed.