September 22, 2003 4:06 PM PDT

Sony, Samsung may join forces on LCDs

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Sony is looking to enter the quickly growing market for liquid-crystal displays and is in talks with Samsung about a partnership, as the Japanese giant tries to reverse its recently falling fortunes.

"Sony is currently in discussion with a number of parties, including Samsung, regarding an investment in the LCD business," Sony said in a statement Monday. "At this point, a final decision has not been reached."

Sony's CRT (cathode-ray tube) TV business has been ailing. Meanwhile, consumers have shown an increased appetite for LCD televisions. An investment in LCD manufacturing makes sense as a strategy to revive Sony's TV business, said Riddhi Patel, an analyst with research firm iSuppli/Stanford Resources.

"The margins for CRTs have been dropping significantly, and that has been impacting one of Sony's key businesses," Patel said. "It's natural for them to look into another technology, especially one that has been in such demand."

Sony reported disappointing earnings for its fiscal year, ending in late April, citing a sales decrease for CRT televisions and Vaio PCs as part of the reason for the lackluster results.

Samsung has been trading the top market share position for LCD panel shipments with LG.Philips LCD, a joint venture established in 1999 between LG Electronics and Royal Philips Electronics. The LCD market requires significant upfront investments, often in the range of billions of dollars, for building next-generation manufacturing plants, which are key to driving down costs and creating large-sized displays.

A Samsung representative in the United States declined to comment.

LCDs allow for flat-panel displays in products such as televisions as well as PC monitors and laptop computer screens.

Sony currently sells LCD computer monitors and televisions but buys the actual LCD from a third party.

LCD televisions are a small fraction of the overall TV market, but the rapid growth in demand has manufacturers looking to move early and fast into a potentially lucrative business. Worldwide shipments of the devices hit 734,000 in the first quarter, up 223 percent compared with the same period a year ago. About 170 million televisions are shipped annually, according to Ross Young, president of DisplaySearch.

Growth in LCD TV sales stems from factors including greater familiarity with the products and demand for them in places where space is limited, such as Japan. Prices are expected to drop, as manufacturers pour more money into new manufacturing facilities.

 

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