Japanese electronics maker Sharp has accepted a bid from Taiwan’s Foxconn Technology Group to acquire it for ¥700 billion ($6.24 billion),Bloomberg reports.
The deal has been years in the making, with the earliest failed takeoverdating back to 2012. Its completion has brought about some controversy in Japan, where foreign acquisitions of domestic tech firms remain unpopular. But it’s completion marks a key win for both Apple and Foxconn.
Foxconn assembles the iPhone—Apple’s best-selling product and the world’s most profitable smartphone—and also manufactures some of its components. These are goods and services it sells to Apple as part of its “bill of materials.”
The crown jewel in that bill is the screen—by far the most expensive part of an iPhone.
Foxconn doesn’t make displays. But Sharp does. So do LG, Samsung, and other electronics companies, some of whom make Android devices that compete with the iPhone.
By acquiring Sharp, Foxconn can earn an even larger portion of the overall bill of materials for the iPhone. Apple also benefits from the deal because it can buy iPhone screens from a partner, rather than a competitor like LG, from whom it currently buys screens. It might also be able to buy the displays for less than what LG or Samsung would charge for them, because of bulk purchasing benefits from Foxconn.
This could ultimately make the iPhone much cheaper to make—though not necessarily cheaper to buy. Apple won’t necessarily pass along the savings to its relatively price-insensitive customers.
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