Samsung Electronics’ surprise decision to invest in Japanese rival Sharp will provide a win-win opportunity to both companies, analysts and industry experts said Thursday.

“Samsung and Sharp have long been rivals, but Sharp has apparently determined that forming an alliance with its rival in flat-screen TVs and mobile phone handsets is required to improve its performance and financial standing,” said David Hsieh of industry market research firm NPD DisplaySearch.

Samsung announced on Wednesday that it will invest about $111 million in Sharp within this month in exchange for a 3 percent stake in the Osaka-based company.

“We’re strengthening our cooperation with Sharp to secure a stable supply channel of liquid-crystal display panels,” Samsung said in a statement following the announcement.

According to NPD DisplaySearch, Sharp has been a key supplier of 40-inch LCD panels to Samsung, shipping over 400,000 units per quarter as well as 200,000 units per quarter of 60-inch LCD panels.

“Sharp started to ship 32-inch (LCD panels) to Samsung at the beginning of 2013. In total, Samsung will be buying more than 1 million panels from Sharp, so it may make sense for Samsung to invest to secure the source,” said Hsieh.

Euh Kyu-jin, an analyst at IBK Securities, said that the capital tie-up between the two electronics firms looks to be positive since Samsung can lock in a steady supply of large-size LCD panels from Sharp for its premium TV business.

Sharp ships up to 73 percent of 60-inch-plus LCD panels globally.

“Because the portion of 60-inch and bigger LCD panels was small for its affiliate Samsung Display, this investment will not have much of an impact on the affiliate,” said Euh.

Industry sources also said that Samsung would be able to concentrate on the development of the next-generation organic light-emitting diode displays, which it has yet to mass produce, with a low-cost supply of LCD TV display panels from Sharp.

The move is also expected to enable Samsung to get its hands on information involving the latest products of its biggest rival Apple as long as Sharp remains as its supplier. Cash-strapped Sharp is currently one of the top display panel suppliers for U.S.-based Apple as it produces displays for the iPhone at its Kameyama plant.

It is most likely for Sharp to have chosen Samsung for a capital tie-up due to the fact that the Suwon-based IT behemoth has agreed not to get involved in its business operations, sources said.

Sharp had planned to raise 132.5 billion yen ($1.4 trillion) from Taiwan’s Hon Hai Precision Industry, better known as Foxconn, last year. But the deal fell through because the companies could not agree on the stock price and because Foxconn wanted more say in Sharp’s operations.

Foxconn said it will continue talks with Sharp, while Intel is also in discussions on the possibility of injecting an investment in the financially struggling firm.

With Sharp signing an agreement with Qualcomm to manufacture next-generation LCD panels for smartphones in return for cash investments from Qualcomm, the U.S. chipmaker is expected to gain a 3 percent stake in the firm once the project is completed.

With the Japanese firm initially offering a 9.9 percent stake, the question now rises as to who will win the remaining 3 percent.

By Cho Ji-hyun (sharon@heraldcorp.com)