Sharp Deal: Shares Soar As Samsung Invests
Samsung has announced a 10.4 billion yen (£70m) capital injection in Sharp, making it the Japanese firm's largest foreign shareholder.
The South Korean company, which will take a 3% stake in its rival, will secure a supply of Sharp's liquid-crystal display technology for its mobile phones and tablets as part of the deal.
Market speculation about the transaction - which was confirmed after the Asian markets closed - sent Sharp's shares soaring more than 17%, before closing 14% higher.
The company said the deal would help shore up its troubled finances while boosting "mutual trust" between the firms.
Samsung added that the investment "would lay a firm foundation for Samsung to secure a steady supply of LCD panels from diversified sources".
The deal is significant for both Sharp - which last year warned about its chances of survival - and Japan's once-dominant manufacturing industry.
Hiroshi Sakai, chief economist at SMBC Friend Securities, said: "For Japan, it is symbolic and shocking news as Sharp, which used to be a frontrunner in the panel industry, is struggling while its rival Samsung has raced past it."
The deal is the latest investment in Japan's companies by Samsung after it acquired a 5% stake in Wacom, which makes digital pen technology, in January.
Mr Sakai added that deals between Japanese and foreign rivals are likely to increase, as a strong yen, weak demand in export markets and fierce competition hit business.
"Many other Japanese electronics makers are struggling to survive," he said.
"But they still have attractive technologies and some foreign rivals are quite interested in them."
It is not just Sharp which is struggling to compete. Sony plans to sell its headquarters in Manhattan and a major building in Tokyo to raise money, and Panasonic is also restructuring its finances.
Sharp has been attempting to raise capital as part of its turnaround plan, and in February said its loss in the nine months to December had doubled to over 420 billion yen (£3bn).
In December it announced investment from US-based Qualcomm to jointly develop future display technology, and has also been in talks with Taiwan-based Hon Hai Precision Industry to raise capital.