Qualcomm, Inc. announced today that it has reached an agreement with Japan’s Sharp Corp. on the expansion of a technology agreement with its Pixtronix, Inc. division to create high quality color, low-power MEMS (Micro Electro Mechanical Systems) displays based on Sharp’s IGZO (Indium Gallium Zinc Oxide) technology. The agreement also provides for Sharp to utilize existing LCD factories to provide manufacturing…and most importantly for the struggling Japanese manufacturer…for Qualcomm to invest $120 million to become a minority shareholder in Sharp.
Does this deal save Sharp?…
We’ve written before about rumors of negotiations between Sharp and a variety of major corporations, as Sharp desperately needs to partner with someone who can provide a much-needed capital infusion. Qualcomm was one of those rumored to consider expanding their already existing relationship with Sharp in ways helpful to both companies.
Qualcomm went out of their way to note in their announcement that the two companies have already been “engaged in development activities for the last year and a half.” In other words, this is not a new initiative, just an expansion of an existing one. Qualcomm is said to believe that Sharp’s IGZO technology has solid commercial potential and wants to help them develop it (and likely benefit from the commercialization of it).
The phases of the deal…
The investment by Qualcomm with take place in phases over time. Not only that, but the company has said that certain “contingencies” will dictate the complete consummation of the deal. It did not explain or otherwise define just exactly what these contingencies are.
“As one of the leading electronics companies in the world, Sharp has an established industry brand and is a recognized leader in the development and commercialization of new innovative display technologies,” said Derek Aberle, executive vice president and group president of Qualcomm in a prepared statement. “Expanding our existing relationship with Sharp to jointly commercialize new MEMS display technologies will help both companies realize their shared goal of driving high performance, lower power displays for a variety of devices, including smartphones and tablets.”
True joint development…
According to the Sharp announcement, this is a true joint development in which Qualcomm’s MEMS displays will be improved through the incorporation of Sharp’s IGZO technology. IGZO is an oxide comprising indium (In), gallium (Ga), and zinc (Zn) – a technology that had been jointly created by Sharp with Semiconductor Energy Laboratory Co., Ltd. of Kanagawa, Japan.
Incorporating IGZO into Qualcomm’s MEMS displays is expected to yield an optimal combination of high color reproducibility and low-power consumption. This is critical for displays in the ever-popular cell phone and smartphone markets.
Going deeper…
Sharp goes on to note that the relationship could further deepen to another level with a round two agreement incorporating chipsets made by Qualcomm Technologies, Inc. – a subsidiary of Qualcomm, Inc. – into the design.
Sharp also extolled the fact that this agreement will accelerate their strategy to shift their manufacturing facilities from producing large-panel LCD displays to small- to medium-sized displays. Demand in the mobile phone and tablet computer markets are considered more stable and growing as compared to the LCD television business which is volatile. As such, Sharp says that this agreement will “expand its revenue and corporate value.”
A major shareholder…
According to a report by the Nikkei, the $120 million investment by Qualcomm will give it about a 5% stake in Sharp at the consummation of the deal. While this will help – a little – to shore up Sharp’s capital base…it won’t solve all of the problems for a company the size of Sharp who earlier this year needed a $4.4 billion bank deal to keep going.
Still, while not solving all of their problems…Qualcomm may have bought Sharp more time to continue to implement further changes necessary to improve their financial performance.
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