Tech

Tim Culpan is a technology columnist for Bloomberg Gadfly. He previously covered technology for Bloomberg News.

While the world looks to Prime Minister Shinzo Abe to see where he'll take Japan next year, a lesser-known name is a better guide to the country's long-term future.

Tai Jeng-wu, 65, took over as president of Sharp Corp. in August after Foxconn Technology Group, and its founder Terry Gou, won a four-year battle for control of the struggling electronics maker. One of Gou's long-time lieutenants, Tai (pronounced Dai) is tasked with delivering on promises to turn the company around after five annual losses in six years.

What Gou saw in Sharp parallels what the rest of the world sees in Japan as a whole: brilliant engineers and leading-edge technology hobbled by costly manufacturing and inefficient management. His long fight to buy the company in order to save it is a metaphor for what all outsiders face when they try to help bring Japan into the modern world.

Glory Gone
Tai Jeng-wu has a tough task ahead to restore Sharp's sales to its earlier heights
Source: Bloomberg

Fluent in Japanese and an operations specialist, Tai's 30-year career at Foxconn means he's been alongside Gou as the company transitioned from plastics molding and low-end components maker to become the world's biggest manufacturer of electronics including the iconic iPhone, which put the Taiwanese company on the map. He led the protracted battle with creditors and shareholders to get control of Sharp, and was instrumental in turning around Sakai Display Products Corp. which Gou owns personally along with Sharp.

Tai is also one of the few people allowed by Gou to share the spotlight, meeting separately with Japanese media to talk up his plans for the national icon.

Early indications show that his leadership is working. Sharp in November forecast its first annual operating profit in three years thanks to cost cuts and more efficient operations. That same announcement, however, saw its revenue forecast fall short of analyst estimates.

Turnaround Trajectory
Early signs suggest that Foxconn is having an impact on Sharp after years of losses
Source: Bloomberg
Note: Periods are for financial year ending March. 2017: Operating is company forecast, net is analyst estimates. 2018: Both are analyst estimates.

To keep the turnaround on track Tai will be trying to leverage Foxconn's close relationships with major clients, including Apple Inc., to keep its finger on the pulse of technology developments and win more orders. For sure, Foxconn and its biggest client are keen to sideline their mutual rival Samsung Electronics Co. which is both a supplier to and competitor of Apple, but that can only happen if Sharp is able to offer the right products.

While keeping an eye on costs, Tai needs to sustain spending on R&D and balance having enough capacity to meet demand for next-generation components such as screens with avoiding overbuilding that could cause a glut and plummeting prices.

This juggling act will be even more crucial in the face of rising competition from Chinese companies that have buckets of money and mountains of ambition. For now, Foxconn and Sharp have the upper hand on the technology and client relationships, but that won't last forever.

Tai will also need to decide which parts of Sharp to keep, and which to discard. In taking over the company, Gou pledged to keep it in one piece. But that doesn't mean he will. I've argued before that Foxconn should sell off some parts, including the business solutions unit that makes printers and cash registers, to raise money and pay down debt.

Division of Labor
Three divisions propped up Sharp's earnings in the first half of 2016, with at least one of them ripe for sale
Source: Sharp

Japanese have been reluctant to split up their industrial empires, as the Sharp case shows, but if Tai can navigate the choppy waters of bruised egos and fiscal prudence to bring this turnaround to fruition then there's hope for the rest of the country. If Tai and Gou can't pull it off, there have to be doubts that anyone can.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Tim Culpan in Taipei at tculpan1@bloomberg.net

To contact the editor responsible for this story:
Matthew Brooker at mbrooker1@bloomberg.net