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Apple supplier Sharp strikes strategic deal with Samsung

Sharp, a key supplier of components that go into iPads and iPhones, lost $5.4 billion last year, prompting the Japanese display maker to increase its reliance on Apple's top rival, Samsung, in order to survive.

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Sharp is entering a three-year rehabilitation program, hoping to reverse its fortunes after losing $5.4 billion in the last fiscal year, Reuters reported on Tuesday. As a part of that plan, the company will cooperate more closely with Samsung on the technologies used in the displays for mobile devices.

"For Sharp," said newly christened Sharp president Kozo Takahashi, "the way forward is to forge various alliances to generate new opportunities."

Last year saw Sharp taking big writeoffs due to excess display capacity after a failed attempt to boost its own TV business. In light of that, the company will focus more heavily on display panels produced for companies like Samsung and Apple.

The news of even closer ties to Samsung comes just two months after the South Korean giant took a $112 million share in Sharp in light of the company's continuing struggles. That deal will provide Samsung with "a long-term, stable and timely supply of LCD panels for large-size TVs and small- and medium-size LCD panels for mobile devices," according to a press release at the time.

The development also adds a layer of complexity to Apple's dealings with Sharp. Eager to distance itself from Samsung thanks to Samsung's willingness to mimic Apple's designs, Apple has been shifting its supply sourcing to Samsung's competitors, including Sharp and LG.

In order to shore up Samsung's supply chain competitor, Apple may have gone so far as to invest $2 billion in Sharp last year, according to one analysis.

The closer alignment with Samsung is driven in part by an apparent slowdown in demand for the displays Sharp makes for Apple's iPads and iPhones. Sharp cut back production of 9.7-inch iPad screens in January, though it is reportedly close to beginning production of displays for the next generation of iPhone.

Supposedly softening demand for Apple's devices has been a theme of late. Over the past few months, multiple suppliers have announced declining revenue, citing demand for Apple products as a reason.