Hon Hai’s $1.6B Sharp investment could point to Apple TV set

A seemingly curious investment of $1.6 billion in Sharp by Taiwan’s Hon Hai, which owns Apple-device manufacturer Foxconn, could be a huge indicator that an Apple TV set is on the way.

The deal was originally thought to be worth around $809 million in Sharp stock, or about 10 percent of the Japanese company. But Bloomberg today is reporting that Hon Hai and “related investment companies” will also buy 46.5 percent of Sharp Display Products, a joint venture with Sony, for around $800 million. Hon Hai will also take over 50 percent of LCD production at Sharp’s Sakai, Osako-based plant, where the Japanese firm recently halved its output.

There’s clearly a lot going on here, but according to BusinessWeek’s Bruce Einhorn, it looks like the groundwork is being laid for a future Apple television. He notes that the Sakai plant makes displays for TV sets 55 inches and larger, and that Hon Hai relied on Apple for 38 percent of its revenue last year (which could go up to 50 percent this year, according to Nomura Securities). The company definitely needs the capacity to build TV sets on a large scale if Apple goes that route.

It doesn’t make sense for Hon Hai to jump into bed with troubled Sharp, which expects to lose $3.5 billion for the fiscal year 2011, unless there’s a clear goal in sight. And by all accounts, it looks like that’s the rumored Apple TV set — something we’ve reported is on track for release later this year.

Hon Hai is also in a position to be freewheeling with its investments. The company reported record quarterly earnings today with net income of $1 billion on $35.8 billion in revenue. Executives pointed to Foxconn’s iPhone 4S contracts and its ability to produce more devices without defects. Clearly the controversy about Foxconn worker conditions didn’t hurt the company’s bottom line (though it has led to further investigations by Apple, and increased pay for workers).

Illustration: Sean Ludwig/VentureBeat