Shares in two companies connected to Taiwan electronics billionaire Terry Gou climbed today on hopes that stockholders may benefit from new business from Apple in connection with a deal involving Sharp of Japan.
Gou’s Hon Hai Precision and Foxconn Technology will buy 9.8% of Sharp for $800 million, and Gou and companies tied to him will pay another $800 million for 46% of Sharp Display.
Taipei-traded shares in Hon Hai rose by 4.6%; Chimei Innolux, Gou’s flat-panel company, rose by 7%. The hope is that Apple will shift business toward Japanese companies like Sharp in the future for new products such as TVs, and away from Samsung, whose phones increasingly compete with Apple’s.
The symbolism of Gou, greater China’s richest electronics tycoon, purchasing a stake inwhat was once one of Japan’s mightiest electronics companies is dramatic, in that it represents a reversal of fortune between China and Japan. Gou ranked No. 184 on the 2012 Forbes Billionaires List published earlier this month with wealth of $5.5 billion, and was Taiwan's fifth-richest man on the 2011 Taiwan Rich List.
However, as Gou knows from his own ups and downs over the years, the investments are also a gamble on future products. The track record of his own panel company, Chimei Innolux, in which he invested his own personal money, has been poor in recent years.
And Hon Hai itself, though yesterday reporting a 83% increase in net profit for the fourth quarter and improvement in profit margins, has frequently in the past few years been a magnet for criticism and seemed only a few steps away from a public relations meltdown. The company has faced international suspicion about its China labor practices and suicides among its workers; it has also been long seen by some investors as lacking transparency. There is also the question of succession: Years after Gou discussed stepping down, he changed course and Hon Hai relies heavily on his forceful leadership.
Nevertheless, the battle-hardened industry leader dubbed "low-cost Terry" continues to win contract manufacturing orders from a slew of companies that compete fiercely against each other. (See related story, “In Terry We Trust.”) Given Apple’s stock and business juggernaut, it’s hard to fault Gou for trying to get an early ride on its next wave.
-- Follow me on Twitter @rflannerychina
