Foxconn Has Reportedly Secured A Deal To Buy Sharp For $6.2 Billion

It looks like Foxconn has won the race to buy troubled electronics maker Sharp after Japanese news agency Nikkei, which has a track record of getting major scoops right, reported that a deal worth 700 billion yen ($6.2 billion) has been agreed upon. Samsung and state-backed Japanese fund Innovation Network Corp are also said to have lodged bids.

Sharp has been in various stages of financial trouble over the past few years, but the company still has a visible consumer electronics business — most notable in TVs — and it supplies a range of components for leading tech companies . The latter part is where Foxconn’s interest almost certainly lies, particularly since Sharp is a top producer of display panels, which happens to be one area where Foxconn (also known as Hon Hai Precision) outsources parts from third-parties.

Potentially bringing its own parts to the table, should it fully acquire Sharp, could be beneficial to Foxconn on a number of levels. First, it’s cheaper to source your own parts than pay market rate to third parties who currently supply them. Also, the arrangement could favor Apple — Foxconn’s most important client — because Foxconn’s panels currently come from companies like Samsung and LG, which sell components and run consumer businesses that directly rival Apple’s smartphones and tablets. Thus using display panels from Foxconn-owned Sharp increases Foxconn’s (already significant) margins on each Apple device sold, and helps keep Apple’s money away from its competitors.

Beyond that, Foxconn has also branched out into electronics under its own brand, including TVs which retail in 7-Eleven stores in its native Taiwan. Clearly there are synergies here with Sharp in the TV business, and potential other consumer segments like smartphones.

A closed deal would end years of Foxconn flashing admiring glances at Sharp. Four years ago, it came close to securing a 10 percent investment in the Japanese firm, only for the deal to fall through, while Foxconn CEO Terry Gou made a $617 million (personal) investment in a Sharp subsidiary in 2012 in an effort to move potential collaborations forward.