The first foreign take-over of a major Japanese firm shows how markets are changing
Taiwanese manufacturer Foxconn is taking over the Japanese electronics company Sharp, which has been making losses for over four years but is still a leader in liquid display technology,.
Before the announcement of a deal, Sharp had been discussing a rival offer from a government-backed consortium of Japanese investors, but that fell through.
We have tended to say that the Japanese electronics market is oligopolistic, because there are just a few major firms. But the trends in the past few years and the fiercely competitive nature of the market (including price competition) have changed it. Maybe it fits the monopolistically competitive market structure better now, particularly once the global market is factored in.
Another part of economic analysis to consider is whether or not the Foxconn-Sharp tie-up will yield economies of scale. On the face of it there does not seem to be much potential for exploiting economies of scale because the two firms’ activities have a limited overlap. But Foxconn assembles most of the world’s iPhones and the merger will give it a more crucial position in the supply chain of Apple, which uses Sharp screens on its devices,
Mergers with foreign firms may enable Japanese firms to become more productive and less cosseted from competition. It could be a way to revitalise Japan’s economy, which is necessary as the domestic population and consumption shrink.