Samsung, Sony join forces

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Samsung, Sony join forces

The best-known Korean and Japanese electronics brands will combine their strengths to produce liquid crystal displays. According to industry sources, Samsung Electronics Co. and Sony Corp. recently agreed to form an LCD joint venture and are currently negotiating the details of the agreement. “Samsung and Sony are benchmarking LG Philips LCD Co.,” an industry official said. LG Philips LCD is a joint venture formed when Philips Electronics of the Netherlands invested in the LCD operation spun off by LG Electronics Co. LG and Philips have equal ownership in the venture. Sony, industry sources said, is likely to invest in Samsung’s LCD operation and handle marketing and finance, while Samsung is expected to be responsible for production and management. Sony’s capital is likely to be used to help build an LCD manufacturing complex in in Tangjeong-eup, South Chungcheong province, the industry official said. Samsung plans to invest 20 trillion won ($17 billion) in the plant by 2010. Construction of the facility began in August 2002. “Sony, which does not have LCD manufacturing facilities, gets a stable source of high-quality LCD panels, while Samsung gets capital to maintain its edge in the LCD market,” the official said. The alliance between the two rivals is seen as a strategic partnership meant to solidify their industry-leading positions in an increasingly competitive marketplace. LCD production poses high risks because of the hefty investment required. One LCD production line costs from 1.5 trillion won to 2 trillion won to start, and Samsung and Sony intend to reduce risk by investing together. Sony is a longtime leader in the traditional cathode ray tube television market but was slow to recognize the emergence of the LCD market and missed investment opportunities. It now buys LCD panels from other companies. The LCD market is expected to double in three to four years. According to DisplaySearch, a market research firm, the LCD market is as large as $25.3 billion this year and will grow to $50.9 billion by 2007. The partnership between Samsung and Sony is forecast to heighten competition with LG Philips LCD, which held an estimated 22 percent share of the worldwide LCD market as of the second quarter. Samsung captured the second largest share with 19 percent. AU Optronics of Taiwan, a smaller rival, is gearing up to expand, with a planned investment of $2.3 billion in a new factory. Industry observers say cooperation among rival electronics makers will likely become more common. “A sense of alarm that they cannot survive without cooperation seems to have encouraged Samsung and Sony to come together,” the industry official said. “There will be more alliances among rivals to ensure mutual survival.” by Kim Chang-gyu
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