Foxconn, the Chinese manufacturing giant, approved the takeover of Japan's debt-riden Sharp after Sharp agreed to a huge cut in purchase price. (DAVID CHANG/EPA)

The global electronics industry has shifted massively in the past decade, and it won’t stand still for long.

Foxconn, the Taiwanese manufacturing behemoth whose massive scale and cheap costs have helped make the iPhone affordable for hundreds of millions of people worldwide, announced Wednesday that it would acquire Japanese consumer electronics company Sharp for $3.5 billion. The deal will give Foxconn, formally known as Hon Hai Precision Industry Co., a 66 percent stake in the company, in what is the first major foreign acquisition of a marquee firm in Japan’s insular technology industry.

Analysts say the deal could position Foxconn to take control of a greater share of the global smartphone supply chain, as both a manufacturer and an assembler of parts, and better position the company as a supplier to Apple in the future. Foxconn has long helped to assemble the iPhone and iPad, but Apple has shifted some of its production to competitors like Taiwanese company Pegatron in recent years.

The Sharp acquisition will take Foxconn a step closer toward a new screen technology known as organic light emitting diode, or OLED, a thinner, more flexible screen that Apple is expected to use in future products. Samsung currently dominates global OLED production.

More generally, the deal reflects the intense pressures faced by the global electronics industry.

For years, the Japanese government, big banks and private companies have worked together to support the country’s flagship electronics companies and fend off foreign purchasers.

Founded as a company that made belt buckles and mechanical pencils in 1912, Sharp captured much of the global market for flat-screen TVs in the mid-2000s. But the company invested heavily in new manufacturing facilities for flat screens and solar panels, and was badly hurt when the price of both dropped due to a vast ramp-up in production, including in China. The company received two bank bailouts in the past four years and cut about one-quarter of its Japanese workforce. Faced with mounting losses and tough competition from lower-cost manufacturers, Sharp has agreed to accept Foxconn’s bid.

The deal is also emblematic of China’s rapidly changing economy. The purchase is a sign of China’s achievements – that the country has created powerful companies that are catching up to high-tech Japanese manufacturers -- but it's also a sign of the challenges that have arisen from China’s success.

China’s economic boom has led to rapid development and manufacturing wages that, according to research by Boston Consulting Group, rose 187 percent between 2004 and 2014. That change has made it less profitable for companies like Foxconn to assemble low-margin goods, and increased the pressure on these companies to move up the value chain to higher-margin businesses – like Sharp's screens, which are among the most expensive components in a smartphone.

Foxconn helped to make the success of the iPhone possible by creating an inexpensive electronics assembly business on a massive scale, employing hundreds of thousands of workers in vast factory complexes. The company's Longhua plant, in the southern manufacturing city of Shenzhen, housed more than 100,000 workers and became the center of a debate over conditions when workers started committing suicide by jumping to their deaths in 2010.

Now Chinese wages are rising, making these vast assembly businesses less profitable. Its companies are eager to transition to more profitable businesses, like high-technology manufacturing and the sale of consumer goods. But Chinese companies still lack strong brand names that resonate with consumers and allow companies to charge high prices for their products.

Many of China’s most successful brands – like Haier, Huawei, Lenovo, Hisense and Xiaomi – barely register among global consumers. This has pushed a wave of cash-rich Chinese companies to acquire widely recognized but financially struggling consumer brands abroad, including well-known names like Volvo, Club Med, Weetabix, AMC Entertainment, the Waldorf Astoria, and divisions of Motorola and IBM.

There’s no guarantee that the Sharp acquisition will be a success for Foxconn; analysts say the acquisition, restructuring and integration of the company could prove to be a costly distraction for the firm. With Sharp, Foxconn is acquiring extensive liabilities, and a flagging business that is expected to report an operating loss of roughly $1.5 billion this fiscal year.

"It’s just a complete fixer-upper," says Alberto Moel, a senior research analyst at Sanford C. Berstein, says of Sharp. Moel says the acquisition is likely to be a major diversion for the attention of Foxconn's management, and "they could probably put that to better use somewhere else."

The deal was announced Mar. 30 following months of negotiations that revealed large outstanding liabilities at Sharp and knocked roughly $900 million off Foxconn’s purchase price. Foxconn initially offered $5.5 billion for control of Sharp, but revised the offer after Sharp disclosed another $3 billion in potential liabilities.

The parties are expected to finalize the agreement Saturday, Apr. 2. The Innovation Network Corporation of Japan, a Japanese-government backed investment fund, had also submitted a bid for Sharp.

This article has been updated to incorporate analyst comments. 

Correction: An earlier version of this story misstated where Foxconn is based. It is a Taiwanese company.