Sharp and Sony have reached a basic agreement to form an LCD manufacturing joint venture, in a move that continues a months-long realignment of key players in the LCD panel business.
The two companies aim to conclude a definitive deal by the end of September that will see a new LCD plant already under construction by Sharp taken over by the joint venture. The plant in Sakai in western Japan is being built at a cost of about YEN 380 billion (AU$3.8 billion), and under the joint venture plan Sony will shoulder 34 percent of the cost of the factory.
The move represents a major shift for Sony, which has previously been investing in LCD panel production with South Korea's Samsung Electronics. The two companies currently compete with Sharp and produce LCD panels in South Korea through S-LCD, which has a factory at Samsung's Tangjeong facility.
But the new alliance will mean Sony will team with Sharp for its most advanced LCD panels.
When complete, the factory is expected to be the most modern of its kind in the world.
It will be a so-called "10th-generation" plant. That means it will be able to accept sheets of mother glass -- from which several panels can be made -- of 285 centimeters by 305 centimeters. Sharp said it will be able to produce six LCD panels in the 60-inch class, eight panels in the 50-inch class or 15 panels in the 40-inch class on each sheet.
The area of each sheet is 60 percent larger than the eighth-generation sheets used at Sharp's current cutting-edge Kameyama factory in Japan. This will translate to a lower per-inch cost for panels produced on the line -- something of great importance in the highly competitive flat-panel TV business.
Initial capacity at Sakai, which is scheduled to begin production by March 2010, will be 36,000 mother glass sheets per month, increasing to 72,000 sheets over an undisclosed period of time.
Corresponding with their investment levels Sony will get one-third of the panels and Sharp will get the other two-thirds from the factory.
But in November, Samsung said it would invest 2 trillion Korean won (AU$2.3 billion) in a new LCD production line at Tangjeong without participation from Sony. The line is scheduled to begin production in the third quarter of this year and will produce panels 50 inches and larger -- the same types of screens that Sharp is targeting with its new factory in Sakai in western Japan.
Hooking-up with Sharp won't mean an end to the alliance with Samsung, said George Boyd , a spokesman for Sony in Tokyo.
The LCD market has seen a big realignment in the last few months and Tuesday's announcement continues this. It also reinforces Sharp's position as the leading LCD producer in Japan.
Toshiba recently forged an alliance with Sharp under which it will procure LCD panels of 32-inches and larger from Sharp, while Sharp turns to Toshiba for some of the chips used in its TVs.
As a result of that new alliance, Toshiba will sell its shares in IPS Alpha Technology, an LCD production joint venture with Hitachi and Panasonic. Hitachi is also planning to leave the venture, with both Toshiba and Hitachi transfering their stakes to Panasonic, effectively making IPS Alpha a subsidiary of Panasonic. As a result Panasonic plans to invest YEN 300 billion in a new LCD manufacturing plant in western Japan.
The market for LCD TVs is highly competitive and the deals reflect the difficulty and high-cost of remaining at the leading edge of the LCD panel market.
In the fourth quarter of 2007 revenue from sales of LCD TVs surpassed that from old-style CRT (cathode ray tube) sets for the first time, according to DisplaySearch. The number one LCD TV vendor was Sony, which had a market share of 19.5 percent during the quarter, DisplaySearch said. In second place was Samsung with a 19.3 percent share followed by Philips and Sharp tied at 10.1 percent and LG Electronics at 7.7 percent.