Terry Gou can save Sharp, but not necessarily Toshiba

Source: Content from Nikkei Chinese website, thank you.

On March 2, Toshiba's stock price rose rapidly in the Japanese stock market. In the morning, it rose 4.5% from the previous trading day and closed at 221 yen. On the 1st, Terry Gou, chairman of Taiwan's Hon Hai Precision Industry, said that Hon Hai would assist Toshiba's semiconductor memory business and inject funds and many elements. This showed a strong willingness to invest in Toshiba, and this statement encouraged the market. Will Toshiba's stock price rebound on the "good news from Hon Hai"?

Toshiba announces postponement of earnings release to March 14 at the latest

Terry Gou: I am serious

When visiting Guangzhou, Guangdong Province, China, Terry Gou responded to a reporter's question, "Are you planning to acquire Toshiba's semiconductor business?" He said, "I'm serious."

Although the specific information such as the amount of funds was not disclosed, Terry Gou said that we have been paying attention to Toshiba for a long time, and we are very confident and sincere. He also said that Foxconn has been actively dealing with the financial problems of Sharp, which it has acquired, and this experience can be applied to Toshiba. It can be seen that Terry Gou's idea of ​​acquiring Toshiba's semiconductor memory business is not "bluffing".

After hearing Guo Taiming's speech, Toshiba's stock price rose rapidly from the opening of the market on the 2nd. It has maintained an upward trend for 2 consecutive days.

Due to Toshiba's urgent decision to postpone the release of its financial report (originally scheduled for February 14), Toshiba's stock price fell sharply. On February 17, it fell to 178 yen, the lowest point in about 11 months since March 2016. The current stock price is slowly recovering, and driven by Guo Taiming's speech, the stock price has risen further.

For Hon Hai, if it acquires Toshiba's memory after Sharp's LCD, it can exert a huge influence on the global IT business through these two powerful components. Although it is very risky to have two businesses that require huge investments, this strategy can be said to be in line with Guo Taiming's goal of "getting rid of the identity of an assembler". In the future, it should face Samsung Electronics of South Korea, which it regards as a competitor.

Foxconn may not be the savior of Toshiba

On the other hand, what about Toshiba? Hon Hai is just one of the candidates for acquiring its memory business. Even if Hon Hai's participation gradually increases the price, allowing the sale of the memory business to be completed smoothly, Toshiba still faces the problem of reconstruction. Because even if the financial physique is improved, Toshiba's operating problems are far more complicated than Sharp's.

After the sale of the memory business, what business will Toshiba rely on in the future? The nuclear power business is related to national policy, and it is unclear to what extent Toshiba can make independent judgments.

In the spring of 2016, Hon Hai formally took over Sharp, which was in the process of restructuring. At that time, in order to clear the "negative legacy", a huge temporary loss was accrued. Sharp was downgraded from the main board of the Tokyo Stock Exchange to the second section of the Tokyo Stock Exchange in the summer of 2016 due to insolvency, but in order to return to the first section of the Tokyo Stock Exchange as soon as possible, it has begun to promote management reforms.

If Toshiba falls into insolvency by the end of March, it will be downgraded to the second section of the Tokyo Stock Exchange like Sharp. Hon Hai wants the semiconductor memory business, not the entire Toshiba company with its uncertain nuclear power business. This is different from Sharp, which was acquired as a whole.

Hon Hai can be the savior of Sharp, but it seems that it will not be the savior of Toshiba. Even though the stock market has mixed feelings about Hon Hai's participation in Toshiba's reconstruction, Toshiba and Sharp are on different paths.

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