Foxconn's profits are climbing on strong demand for AI servers, while its subsidiary Sharp—long seen as a drag on earnings—has delivered promising results. Sharp's second quarter fiscal 2024 profit hit JPY6.29 billion (US$42.1 million), with net income reaching JPY24.25 billion, boosting its first-half profit to JPY22.96 billion. These gains highlight the early impact of reforms initiated by Foxconn Chairman Young Liu, who stepped in as Sharp's chairman in June.
Financial turnaround
Despite revenue declining year over year, Sharp's profitability was lifted by the closure of its Sakai Display Products (SDP) plant and a recent asset sale. Sharp has maintained its fiscal-year profit outlook, underscoring the success of structural shifts to streamline its business.
Strategic transformation
Liu's strategy for Sharp centers on an asset-light model, brand development, and separating brand from component operations. Sharp's brand segment is gaining traction in the smart office market, while on the component side, the Sakai plant's transformation and operations in camera modules and semiconductors under Sharp Sensing Technology Corp. (SSTC) and Sharp Fukuyama Laser (SFL) are showing promise. Both units remain profitable, suggesting a steady path forward.
AI data center prospects
Sharp is repurposing its Sakai facility into an AI data center, with telecom leaders KDDI and SoftBank planning to establish facilities on-site. SoftBank aims to finalize agreements by late 2024, while KDDI expects to follow in early 2025, though further details on the center's development remain pending.
Management commitment
Liu has pledged support for Sharp from Foxconn's position as a major shareholder, having invested over 300 days analyzing Sharp's operations before assuming chairmanship—a period dubbed "the 300-day defuse." This groundwork underpins a strategy aligned with Sharp's needs.
Sharp's brand expansion, however, will require broader markets and innovative products, supported by investment in R&D and market entry. For Foxconn, which is evolving from manufacturing to tech services, Sharp's goals represent the next set of challenges. While Liu's initial progress at Sharp has impressed the market, the longevity of his strategic roadmap remains to be tested.
