Foxconn wants to take back Sharp's US license, but Hisense refuses to return it in advance

When leading iPhone assembler Foxconn Technology Group acquired Sharp Corp. last year, one of Foxconn's goals was to use the Japanese company to build its own global electronics business brand. But there was a major obstacle: The rights to sell Sharp-branded TVs in the United States belonged to a Chinese company, which said it did not intend to accept Sharp's request to reclaim the brand license.

Taiwan's Foxconn is one of the world's largest contract manufacturers of electronics, producing products for other companies, according to a report on the Wall Street Journal website on January 5. Foxconn's customers include Apple, Sony and Nintendo. But the company faces low profit margins and limited growth potential.

That's why Foxconn Chief Executive Terry Gou spent 388.8 billion yen ($3.3 billion) last year to buy Sharp, a 104-year-old consumer electronics maker. Gou said he wanted to use Sharp's well-known brand, which has been built over a century, to establish Foxconn as a respected innovator of high-tech consumer electronics.

To revive the Sharp brand, Gou needs to reclaim some of the rights that Sharp sold off to raise cash during repeated business crises in the past few years. Tai Jeng-wu, Gou's longtime lieutenant who was sent to Japan to run Sharp, in December regained the rights to sell Sharp-branded TVs in Europe by acquiring a company that holds the license.

Dai Zhengwu said at a news conference in November that he also hopes to cancel a deal with Chinese electronics maker Hisense, which last year bought the rights to sell Sharp-branded TVs in the United States until the end of 2020.

It is reported that Hisense said it would not return the brand authorization to Sharp before this deadline.

In an email to The Wall Street Journal, Hisense General Manager Lin Lan said they were forced to defend the licensing agreement and that Sharp's brand authorization was important to them. Lin Lan confirmed receiving Sharp's request to withdraw its brand authorization.

A Sharp spokesman declined to comment beyond Tai’s statement. Foxconn also declined to comment.

Television is no longer a big profit item for electronics companies due to the intensive penetration of low-cost Chinese manufacturers. Still, TV remains an important marketing tool for companies looking to put their brand names front and center in the living room, said Atsushi Nagauchi, a professor at Waseda University's business school who once worked at Sony 's TV unit.

That’s why two Japanese companies, Sony Corp. and Matsushita Electric Industrial Co., are sticking with selling TVs in the U.S. even as they cut back on many consumer businesses . Hisense is looking to expand in the U.S., where it plans to unveil new Sharp-branded TVs at the Consumer Electronics Show in Las Vegas this week.

Lin Lan said that Sharp benefited from the relevant licensing transactions because Hisense had to pay a certain fee to Sharp for each Sharp-branded TV sold.

However, Sharp Chief Executive Officer Tai Jeng-wu said at a news conference in November that he wanted full control of the Sharp brand. He said reclaiming the brand license was the first step in a long-term strategy to promote Sharp-branded products that are currently sold mainly in Japan, such as air purifiers , cooking pots and Robohon, which combines smartphone and robot functions.

While Hisense's refusal to renegotiate could be a strategy to extract a better deal from cash-rich Foxconn, it would pose a challenge to Foxconn if Hisense sticks to its stance.

Foxconn plans to build an $8.8 billion TV panel factory in Guangzhou using Sharp's technology.

Foxconn has said it will stop supplying TV panels to Samsung Electronics and Hisense, according to a person familiar with the matter, which means Foxconn needs to find another big customer - possibly its subsidiary Sharp.

Besides China, the United States is a major market, where consumers favor large-screen TVs, which use the panels that Foxconn's planned Guangzhou plant will produce.

Foxconn, also known as Hon Hai Precision Industry Co., has conducted some small-scale tests in the past few years by marketing its products directly, but analysts say restoring Sharp's international brand status is a big challenge.

Sharp is a household name in Asia but less so in Europe and the United States, meaning Foxconn will need a large marketing budget for at least the next five years, highlighting the need to reclaim the license to sell TVs in the United States, said Atsushi Nagauchi, a professor at Waseda University.

Hisense says the Sharp brand has helped it build marketing skills and relationships with big electronics retailers in the U.S. Analysts say Hisense could eventually use that to promote its own Hisense-branded televisions, creating another challenge for Foxconn.

Hisense declined to comment on its plans.

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.