Apple Might Acquire Stake in Foxconn Through Parent Company Hon Hai

Taiwan’s Hon Hai Precision Industry, which owns Foxconn assembly plants that manufacture devices for Apple, is planning to issue new Global Depository Receipt (GDR) sales to raise more than US$ 3 billion in fresh capital. Its biggest client, Apple, is reportedly planning to become a major investor. With this acquisition, Apple might also be in its way to independence from arch-rival Samsung in terms of touchscreen supply.

Apple is reportedly planning to buy a stake in Taiwan's Hon Hai Precision Industry, which owns Foxconn plants that manufacture the iPhone, iPad and iPod. (Photo Credit: AP)

Hon Hai’s fundraising activity is the biggest for a Taiwan technology company so far, reports MIC Gadget. In line with Apple’s recent announcement of dividend payments, the company has not ruled out using its cash reserves to make an acquisition or investment in another company. If it uses its US$ 100 billion cash reserves to acquire Hon Hai GDR shares, it can potentially own about 9% of the Taiwanese company, which includes its assembly facilities in China.

But it’s not only Hon Hai and Foxconn that Apple might potentially strike a deal with, if it does invest in Hon Hai. The Taiwanese company has recently made a strategic deal with Japan’s Sharp Electronics for the supply of LCD screens. In this deal, Sharp will use components from Hon Hai to lower the cost of its LCD production, in order for Sharp to improve its cost competitiveness in the display business.

With a stake in Foxconn, Apple will be able to extend its influence on Sharp, too, which might have an impact on its display business. There are even speculations that Apple is behind Hon Hai’s deal to run to the aid of struggling Sharp. With the deal, Hon Hai gained a 46.5% stake in Sharp’s Sakai LCD plant, gets a share of operational control, and gets a share in revenues, as well. It was likewise speculated that the deal will involve the production Apple’s much-anticipated integrated Apple TV.

It can be noted that Apple currently sources most of its iPad displays from Samsung. But with its continuing patent disputes with Samsung around the world, Apple might be looking into ways to reduce its dependence on Samsung for display and memory components. Sharp has reportedly failed to pass Apple’s stringent quality requirements, although Apple will be able to use a stake in the company as leverage in negotiating for better prices with Samsung.