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Sharp’s Planned U.S. TV Revival Blurred by Chinese Rival
The right to sell Sharp-brand TVs in the U.S. belongs to China’s Hisense. Sharp wants it back.
By TAKASHI MOCHIZUKI in Tokyo and EVA DOU in Beijing
Jan. 4, 2017 5:53 a.m. ET
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TOKYO—When leading iPhone assembler Foxconn took over Sharp Corp. last year, one of its goals was to use the Japanese company to build its own global brand-name electronics business.
There is one major snag: In the U.S., the right to sell Sharp-brand televisions belongs to a Chinese company that says it has no intention of accepting Sharp’s plea to get its name back.
Taiwan’s Foxconn Technology Group is one of the world’s largest contract electronics manufacturers, making goods on behalf of other companies. Its clients include Apple Inc., Sony Corp. and Nintendo Co. But the business faces low margins and limited growth potential.
That is why Foxconn chief Terry Gou spent ￥388.8 billion yen ($3.3 billion) last year to purchase Sharp, a 104-year-old consumer electronics maker. Mr. Gou said he wanted to leverage the well-known brand, built over decades, with the ambition of making Foxconn a respected, high-tech consumer-electronics innovator.
To revive the Sharp brand, he has to recover some of the rights it sold off to raise cash during repeated business crises over the past few years. In December, Tai Jeng-wu, the longtime Gou lieutenant dispatched to Japan to lead Sharp, retrieved the rights to sell Sharp-branded TVs in Europe by buying the company that had the license.
At a news conference in November, Mr. Tai said he also intended to undo a deal with Chinese-based electronics maker Hisense International Co., which last year purchased the rights to sell Sharp-branded TVs in the U.S. through the end of 2020.
Hisense says it won’t give the name back before then.
“We feel compelled to defend our licensing agreement,” said Hisense general manager Lan Lin in an email to The Wall Street Journal. “The Sharp brand name is important to us.” He confirmed getting the request from Sharp.
A Sharp spokesman declined to comment beyond Mr. Tai’s statements. Foxconn declined to comment.
Television sets are no longer a big profit item for electronics companies because of heavy penetration by low-cost Chinese makers. Still, the TV remains an important marketing tool, and companies like the idea of having their brand name right in the center of the living room, says Waseda Business School professor Atsushi Osanai, who previously worked at Sony’s TV unit.
That is why Sony and Panasonic Corp., two Japanese companies that have scaled back many consumer operations, still sell TVs in the U.S. Hisense hopes to expand its presence there and plans to introduce new Sharp-branded TVs at the Consumer Electronics Show this week in Las Vegas.
Mr. Lin of Hisense said Sharp benefits from the licensing deal as the Chinese company pays a certain fee to the Japanese company for each Sharp-branded TV it sells.
But Mr. Tai, the Sharp chief executive, said at the November news conference that he wanted full control of the Sharp brand. Recovering rights was the first step of a longer-term strategy to roll out Sharp-branded products that are currently sold mainly in Japan, such as air purifiers, cooking pots and Robohon, a robot-smartphone hybrid, he said.
Mr. Gou told a shareholder meeting in June that Foxconn’s manufacturing efficiency could help Sharp price competitively in global markets.
“We want to help Sharp lower costs,” said Mr. Gou at the event, in between hand-feeding attendees spoonfuls of stew from a Sharp steam cooker. He recalled how a Beijing friend had shipped a Sharp refrigerator back from the U.S. in 1986 and it was still working. Mr. Gou also said his wife liked Sharp hairdryers but couldn’t find them in Taiwan.
While Hisense’s no-renegotiation stance could be a tactic to get a better deal from cash-rich Foxconn, the Chinese company would pose a challenge if it sticks to its guns.
Foxconn plans to build an $8.8 billion television flat-panel factory in Guangzhou, China, using Sharp technology.
Foxconn has said that it would stop supplying panels to Samsung Electronics Co. and Hisense, according to a person familiar with the matter, meaning it needs another big customer—which could be its own subsidiary, Sharp.
Apart from China, the U.S. is the main market where consumers favor large-screen TVs using the type of panels that the new Guangzhou factory is set to build.
Formally known as Hon Hai Precision Industry Co., Foxconn has run several small-scale test-runs in marketing products directly in the past few years. But reviving Sharp as a global brand will be a challenge, say analysts.
The brand is well-known in Asia, but less so in Europe and the U.S., said Waseda’s Prof. Osanai, meaning Foxconn would need a large promotional budget for at least for the next five years, underlining the need to get the U.S. TV license back, he said.
Hisense said the Sharp name has been helpful to build marketing know-how and relationships with big-box electronics retailers in the States. Analysts say it could eventually use this to promote its own Hisense-brand TVs, creating another challenge for Foxconn.
Hisense declined to comment on its plans.
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