• by Thom Forbes , February 25, 2016

There has been a snag in what appeared to be a $6-billion done deal Thursday morning between Sharp, the troubled Japanese electronics products brand, and Foxconn, the Taiwanese manufacturer best known as the assembler of most of the world’s iPhones.

“Foxconn, known formally as Hon Hai Precision Industry Co Ltd, said that Sharp on Wednesday morning had ‘couriered over a new key document to the management of Hon Hai,’” Reuters’ J.R. Wu reports. “Foxconn said it responded to Sharp on the same day that the content needed to be clarified before a deal could be signed.”

If the deal for 66% of Sharp eventually goes through, “it would be the first foreign takeover of a major Japanese electronics firm in a historically insular technology sector,” the BBC reports. “Japanese officials had been reluctant to let Sharp fall under foreign ownership because of the distinctive technology behind its display panels.”

There was, however, only one other offer on the table for Sharp.  

“The board of the century-old consumer electronics maker had to choose between Innovation Network Corp. of Japan’s plan to restructure by spinning off businesses, or staying whole under a foreign parent,” Pavel Alpeyev and Takashi Amano write for Bloomberg Business.

“Sharp would remain an independent company and keep the brand under new ownership, it said in a statement,” Alpeyev and Amano report. It also commits to “retaining existing employees,” “providing sufficient support to the alliances with third parties that Sharp desires to make” and “maintaining Sharp’s research and development and manufacturing functions in Japan.”

The headline on a Financial Times brief about the postponement asks: “Is Foxconn chief playing a game of brinkmanship?”

Foxconn chairman and founder Terry Gou has been pursuing Sharp since 2012 but Foxconn was considered the underdog in the recent bidding, according toDow Jones Business News’ Takashi Mochizuki.

“Foxconn wants to join forces with Sharp to develop advanced screens for iPhones so Apple won't need to rely on rival Samsung for the technology, according to people familiar with the matter,” he writes. “The OLED sector is virtually a monopoly right now,” Sigma Intell VP Lisa Li tells Mochizuki. “This must be something Apple is pretty concerned about.”

As for Gou, he “has sought to become a major supplier of high-end smartphone screens for years, dubbing the project internally as his ‘Eyeballs Plan,’” people familiar with the company's strategy tell Mochizuki.

“The deal would also give it access to consumer markets through a recognized brand, analysts say. But Foxconn would be paying a big chunk of change for a heavily indebted, loss-making company,” points outCNN Money’s Jethro Mullen.

“Sharp … has been mired in difficulties in recent years,” Mullen continues. “It has been trying to restructure its troubled liquid crystal display (LCD) business after heavy investment in big TV sets failed to pay off.”

Sharp’s notice of the initial agreement also makes a point of indicating its desire “to provide new products and services which realize the ‘new connections between people and house appliances’ in developing fields, such as robotics and the Internet of Things (the ‘IoT’).”

Sharp, which is based in Osaka, "has long been a prized brand in Japan, beginning with its sale of mechanical pencils, still known as ‘sharp pencils’ here. It also pioneered hand-held electronic devices,” reports the Associated Press’ Yuri Kageyama on STLToday.com.

“Sharp had its beginnings as a Tokyo-based metalworking shop in 1912. It later made its fame with Aquos flat-panel TVs and nifty Internet-connecting cellphones, long before the arrival of iPhones in Japan,” Kageyama continues. “But its finances deteriorated in recent years as prices of LCD panels dropped, and it could not beat competition from Asian rivals.”

Bloomberg Gadfly technology columnist Tim Culpan writes that if the deal gets back on track, Gou “should jettison at least two” of its five divisions, which are Consumer Electronics, Energy Solutions, Business Solutions, Electronics Components and Displays. 

And one of them should be Consumer Electronics, Culpan maintains. 

“For many, Sharp is synonymous with high-end consumer electronics. The company's decades of experience and marketing nous has built a reputable brand that spans televisions to white goods,” he points out. But Foxconn competing with customers it supplies with that sterling brand, he maintains, would be “a recipe for disaster.”

First, however, Sharp and Foxconn will have to resolve their differences over the ingredients of the stew they thought they were cooking.